NEW YORK – Crude prices rallied almost $2 to above $52 a barrel Tuesday, as traders bought contracts to cover earlier commitments made when prices were falling.
Light, sweet crude for May delivery rose $1.92 to settle at $52.29 per barrel on the New York Mercantile Exchange (search). On Monday, the contract had dropped as low as $49.66 — its lowest in two months — before recovering to close at $50.37.
Heating oil rose 5.07 cents to $1.4930 a barrel, while unleaded gas gained 7.57 cents to $1.5701 a gallon.
In London, Brent crude for June rose $2.16 to $52.94 per barrel on the International Petroleum Exchange.
The crude futures market dropped more than $8 over the last two weeks but failed to close below the $50 mark, despite a perfect storm of economic worries, rising U.S. crude inventories and increased OPEC (search) production.
"We're running out of reasons to keep that real bearish mantra we've had these past weeks," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Oil prices have fallen more than 10 percent since an intraday peak of $58.28 a barrel April 4. Traders who reached deals to sell borrowed oil contracts are now being forced to buy oil at more expensive prices to complete as the deals come due, and that demand drove prices higher on Tuesday.
"The failure to close below $50 may signal we put in a seasonal low," Flynn said. He added that continuing good weather could mean stronger-than-anticipated demand in gas supply.
The May crude contract expires Wednesday, the same day the Department of Energy (search) releases its weekly petroleum stocks report — where the focus is shifting from heating oil to automobile fuel inventories ahead of the Northern Hemisphere's summer driving season.
Tuesday's gains began after a move by Russian authorities to freeze the main remaining assets of Yukos unsettled markets, even amid expectations of further accumulation in U.S. crude stocks.
"The market is awaiting tomorrow's stocks data release in the United States eagerly and the latest developments in Russia will definitely have a long-term impact on the market," said John Shoe, an analyst with Barclays Capital in London.
The Moscow Arbitration Court issued the ruling in response to a lawsuit by the business' former core production unit, company officials said.
State-run oil producer Rosneft, which now owns the Yuganskneftegaz unit, is claiming 163 billion rubles ($5.9 billion) from Yukos in damages including for allegedly paying below market prices for crude supplies from the oil-pumping facility.
The ruling bars Yukos from disposing of shares in its major remaining subsidiaries including its top two oil production units Tomskneft and Samaraneftegaz and its main refinery, Angarsk, on April 5, Russia's Interfax news agency said.
While the shares being frozen does not affect Yukos' day-to-day production operations, the lawsuit is widely seen as the Kremlin's effort to control the company's assets — a key in sending prices upward in 2004.
On Monday, Organization of Petroleum Exporting Countries president Sheik Ahmed Fahd Al Ahmed Al Sabah said the cartel would increase production by an additional 500,000 barrels daily to cope with anticipated demand.
"In May, there will be an increase in production which will be made necessary by the demand in the third quarter," Al Sabah said.
Al Sabah said current crude prices were "almost" fair and "it looked like the market is well supplied." He did not say what he regarded as a fair price.