Oil rallied the third straight day as bulls convinced the market that it had hit bottom after a rout of seven months pounced on the weak dollar and cuts in oil companies spending plans despite signs of an increase in crude stocks.
Prices of crude have increased around 15% since the market was jolted by the news on Friday that there was a decline in the number of US oil drilling rigs.
According to Reuters Brent crude oil, the benchmark rose $1.41 at $56.16 per barrel after rallying to a high of one month at $57.23.
US crude or WTI climbed $51.04 or $1,47 after having reached $51.55 earlier.
Phil Flynn, analyst at Price Futures Group said, “You’ve got a number of themes working to push the market higher.”
John Kilduff, partner at New York energy hedge fund Again Capital said, “It needs to get worse in terms of productive capacity actually going offline. Also, the capes cuts announced by the respective oil firms are just plans that can be reversed when prices began steady recovery, so the desired production cuts may not fully materialize.”
According to The Wall Street Journal refineries are getting better profits for turning their crude into gasoline and other products since there is more storage available for oil products in comparison to that for crude oil.
Gasoline futures rose 1.1% to $1.5617 per gallon and the diesel futures traded higher 2.55 at $1.8005 per gallon.
On Tuesday, RBC Capital Markets cut its forecast for Brent crude for the year to $57 per barrel from $71 per barrel and lowered the Nymex crude forecast to $53 per barrel from $65 per barrel.
The bank said, “World oil prices are searching for a bottom in a landscape characterized by excess supply. Severe capital spending cuts underway globally, in tandem with natural declines are laying the groundwork for an oil price recovery to take shape during the second half of 2015 and into 2016.”
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