Oil prices rose more than $1 a barrel Tuesday, recovering some ground lost a day earlier as traders monitored the weather and OPEC production cuts.
Light, sweet crude for March delivery rose $1.16 to $55.17 a barrel in New York trading on the New York Mercantile Exchange. On Monday, it fell $1.41 to settle at $54.01 a barrel.
March Brent crude at London's ICE Futures exchange rose $1.15 to $54.83 a barrel.
"We're still backing and filling from yesterday," said Tim Evans, energy analyst at Citigroup Global Markets. "The markets are certainly reassessing whether yesterday's declines were appropriate or not."
Oil prices got a lift Tuesday from a Wall Street Journal report, saying that Saudi Arabia has told its customers it will cut supply by a further 158,000 barrels a day, effective Feb. 1. "After these cuts, our oil production will have declined by about 1 million barrels a day since last summer," a Senior official told the newspaper.
Traders have been closely monitoring reports about how many OPEC members are complying with output goals.
The Organization of Petroleum Exporting Countries said it would begin cutting production by 1.2 million barrels a day in November but some traders speculate that some cartel members were not complying. The group said late last year it planned to cut production an additional 500,000 barrels a day starting Feb. 1. Saudi Arabia is OPEC's biggest producer.
The signs of OPEC compliance with its pledges to cut output, as well as the return of colder weather to the U.S. Northeast, which is responsible for 80 percent of the country's heating oil consumption, have led prices mostly higher of late.
The colder-than-normal temperatures are expected to stick around in the Northeast through mid-February at least, Evans said. Natural gas and heating oil prices have also received a boost from the blustery weather.
Heating oil rose more than 3 cents to $1.5805 a gallon on the Nymex, and natural gas futures rose nearly 41 cents to $7.346 per 1,000 cubic feet. Gasoline futures rose more than 4 cents to $1.4825 a gallon.
Even with the wide fluctuations in daily trading this month, energy analyst Victor Shum predicted that crude oil prices in the near term would remain in the range of $50 to $56 a barrel.
"The larger-than-usual fluctuations in a day of trading are reflective of the conflicting signals in the market," said Shum, with Purvin & Gertz in Singapore. "The market is seeking direction."
"On the one hand, we had cold weather in the Northeast United States driving prices up, but the winter season is coming to an end. On the other hand, we have rather inconclusive data showing the level of OPEC compliance on their output cuts."
Michael Davies, an analyst at commodity broker Sucden Ltd. in London, said the market was also looking ahead to the weekly report on U.S. inventories on Wednesday.
U.S. crude imports are expected to have risen by 1.2 million barrels in the week ended Jan. 26, according to a survey of analysts by Dow Jones Newswires. Gasoline stockpiles are expected to gain 1.6 million barrels, while distillate stockpiles, which include heating oil and diesel, are seen falling by 2.6 million barrels.