Oil rises on U.S. production dips, Middle East tensions

April 14
6:15 PM 2015

Crude oil futures rose on Tuesday on signs of falling U.S. oil production, weakness in the dollar and tensions in the Middle East, particularly Yemen.

North Dakota's February oil production fell 15,000 barrels per day (bpd) versus January, data showed on Tuesday, although the number of producing wells hit a record high.

"Today's (U.S.) led crude spike was spurred primarily by supportive supply side headlines suggesting a quicker production response to rig declines than previously anticipated," said Jim Ritterbusch, president at Ritterbusch & Associates.

North Dakota's report followed the U.S. Energy Information Administration's (EIA) Monday report forecasting U.S. shale production will fall by 45,000 bpd to 4.98 million bpd in May, which would be the first monthly decline in four years.

Shale production helped boost U.S. output by more than 4 million bpd since 2010, a factor in oil's stunning price retreat since June.

Ahead of Wednesday's May contract expiration, Brent rose 50 cents to settle at $58.43 a barrel, just above its $58.40 100-day moving average. Brent also was above that average intraday Monday.

U.S. May crude rose $1.38 to settle at $53.29, surging above its 100-day moving average of $52.96.

The moves above those averages, closely watched by market technicians, were the first since July 20014.

The dollar's weakness also helped boost dollar-denominated oil prices.

Crude futures rose in post-settlement trading after the American Petroleum Institute (API) reported crude stocks fell only 2.6 million barrels last week, less than analyst expected. [API/S]

U.S. gasoline and diesel futures also rose on the API data, showing that gasoline and distillate inventories fell.

EIA inventory data is due at 10:30 a.m. EDT on Wednesday.

Also supporting oil were tensions in the Middle East, where fighting continued in Syria, Iraq and Yemen. Analysts fear Yemen's civil war could destabilize neighboring Saudi Arabia.

Iran said it will submit a peace plan for resolving the crisis in Yemen to the United Nations on Wednesday.

Iranian Oil Minister Bijan Zanganeh was quoted on Tuesday as saying OPEC should cut oil production by at least 5 percent, or about 1.5 million bpd.

Saudi Arabian oil minister Ali al-Naimi discussed oil markets on Tuesday with Russia's ambassador to Riyadh Oleg Ozerov.

Saudi Arabia's March production at 10.3 million bpd was considered bullish and incremental internal demand could "substantially reduce global spare capacity," energy information provider PIRA Energy Group said in its weekly report on Tuesday.

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