Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on a mix of technical buying and industry talk as well as U.S. government data suggesting the global supply glut could be ebbing.
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Global benchmark Brent crude
Early gains were fueled by a U.S. government forecast for tighter oil supplies next year, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. The rally accelerated above $50 on chart-based buying and a weakening dollar.
Brent settled up $2.67, or 5.4 percent, at $51.92 a barrel, breaking out of the $47 to $50 band it had traded since early September. Its session peak, a penny shy of $52, was the highest since Sept. 3, and took three-day gains to more than 7 percent.
West Texas Intermediate (WTI), the U.S. crude benchmark
"We have reduced the probability of a return to the $37 to $38 area per nearby WTI," said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in Chicago. "We will maintain a longstanding view that price declines below this support level are virtually off of the table."
Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred, saying: "Steeper U.S. production declines over the near term have created a bid for oil prices."
Even so, analysts told a Reuters survey that U.S. crude stockpiles likely rose last week for a second straight week as more refineries went into maintenance works. [EIA/S]
The American Petroleum Institute industry group will issue at 4:30 p.m. (2030 GMT) preliminary data on U.S. crude inventories for last week, before official numbers on Wednesday from the Energy Information Administration (EIA).
Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, the EIA said in its monthly report on Tuesday that suggested a surplus of crude is easing more quickly than expected.
Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the EIA said in its Short-Term Energy Outlook. Demand is expected to rise 270,000 bpd to 95.2 million barrels, up 0.3 percent from September's forecast.
Oil executives at an industry conference in London, meanwhile, warned of a "dramatic" decline in U.S. output that could lead to a price spike if fuel demand escalates. Mark Papa, former head of U.S. shale producer EOG Resources, told the "Oil and Money" conference that U.S. production growth would tail off this month and start to decline early next year.
Russia's energy minister said Russia and Saudi Arabia discussed the oil market in a meeting last week and would continue to consult each other.
OPEC Secretary-General Abdullah al-Badri said at a conference in London that OPEC and non-OPEC members should work together to reduce the global supply glut.
Iran's crude sales were on track to hit seven-month lows as its main Asian customers bought less.
(By Barani Krishnan; Additional reporting by Karolin Schaps in London and Aaron Sheldrick in Tokyo; Editing by David Gregorio and Lisa Shumaker)