Crude-oil futures rallied above $50 a barrel Tuesday, propelled by evidence that members of the OPEC cartel are going ahead with announced production cuts as well as by heightened tensions in the Middle East, where Israel widened its ground offensive against Hamas in the Gaza Strip.
Crude for February delivery rose $1.40, adding 3% to stand at $50.21 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday high of $50.47 a barrel.
It marked the first time that oil prices have traded above $50 a barrel since Nov. 28. On Monday, the benchmark crude contract rallied more than 5%.
Fighting between Israeli forces and Palestinian gunmen continued Tuesday, as the International Red Cross said that the Gaza Strip faces a "full-blown humanitarian crisis," the BBC reported.
"The heightened tensions in the [Middle East] are prompting buyers to pick up crude oil at relatively depressed levels, with sentiment being helped further by the fact that OPEC is starting to tighten supplies," said Edward Meir, an analyst at MF Global, in a research note.
The Organization of the Petroleum Exporting Countries announced in December that it will cut production by 4.2 million barrels a day since its September levels, but there was skepticism in the energy market about whether or not the cartel's member nations will actually comply with the announced production cuts.
Kuwait and Iran, two of OPEC's members, have told some Asian customers they will implement bigger supply curbs, Reuters reported on Tuesday.
Also lending support to energy prices was the ongoing dispute between Russia and Ukraine over natural gas.
Countries in Eastern and Central Europe reported a sharp tightening in natural-gas imports, an offshoot of Russian energy giant OAO Gazprom's move last week to cut supplies to Ukraine over a price dispute. This has led to reduced supplies of natural gas moving through pipelines in Ukraine to other European countries. Read more.
In Globex action, natural gas for February delivery rose 11 cents to $6.18 per million British thermal units.
Rounding out the early action in energy futures, February reformulated gasoline rose 4 cents, or 3%, to $1.22 a barrel and February heating oil gained 7 cents, or 4%, to $1.64 a gallon.
