Crude-oil futures rose Tuesday for a fourth straight session, rallying above $50 a barrel for the first time in five weeks on evidence that members of the OPEC cartel are going ahead with announced production cuts.
Heightened tensions in the oil-rich Middle East, where Israel widened its ground offensive against Hamas in the Gaza Strip, also helped oil move higher.
Crude for February delivery rose $1.40, adding 3% to stand at $50.21 a barrel on the New York Mercantile Exchange and rising above $50 for the first time since Dec. 1. Earlier, the contract hit an intraday high of $50.47 a barrel.
The benchmark contract has gained more than $10, or 25%, in the four trading sessions since Dec. 30.
"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," wrote Edward Meir, an analyst at MF Global, in a research note.
OPEC cuts
Iran and Kuwait will deepen curbs on supplies to customers this month to join OPEC peers in cutting back output, Reuters reported Tuesday, citing refiner sources.
The Organization of the Petroleum Exporting Countries, which controls about 40% of the world's oil production, agreed in December to cut production by a record 2.2 million barrels a day starting from January, taking their total curbs since September to 4.2 million barrels a day. That's the equivalent to 5% of global oil supply.
But there had been skepticism in the energy market about whether the cartel's member nations would actually comply with the announced production cuts. Despite reported moves by Iran and Kuwait, there's still a question about whether other members, such as Venezuela, will actually cut back.
As they plan production cuts, some OPEC members have also said they plan to raise prices.
OPEC's biggest producer, state-owned Saudi Arabian Oil Co., better known as Saudi Aramco, on Sunday hiked nearly all of its official selling prices for February crude, according to Dow Jones Newswires.
Separately, Iran's OPEC governor Mohammad Ali Khatibi said Monday that OPEC members decided to hold an extraordinary meeting in Kuwait in February to discuss oil prices, according to Dow Jones Newswires.
OPEC pegged the price of its reference basket of 12 crude oils at $39.95 a barrel Friday, up $4.37 from $35.58 a barrel Wednesday. The reference basket isn't used to set oil prices in the market, but it gives a picture of the value of OPEC's output.
Gaza fighting
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.
Although neither Israel nor Palestine controls oil reserves, the fighting has raised tensions in the Middle East and may create some "short covering" in oil market, analysts said.
An Iranian Revolutionary Guard commander on Monday urged Islamic nations to use crude as a weapon to exert pressure on nations supporting Israel, according to the Associated Press.
Iran is the world's fourth-biggest oil producer. Oil prices had jumped in July 2006 after Israel attacked Iranian-backed Hezbollah forces in Lebanon, also over the firing of rockets into Israel.
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.
Natural gas for February delivery rose 1.6% to $6.174 per million British thermal units.
In other energy futures, February reformulated gasoline rose 3.4% to $1.2221 a barrel and February heating oil gained 4.9% to $1.6527 a gallon.
