Crude Oil Soars To End Above $53 On Supply Cut Speculation

(RTTNews) - U.S. crude oil surged to end at its highest for the year Tuesday, on speculation of supply cuts due to a significant decline in U.S. drilling activity and with the dollar dropping to a one week low after some weak U.S. factory orders data in December.

After oil prices plummeted in the last more than six months, investors seem convinced it has bottomed out as oil companies enforce spending cuts. This, along with the news of a drop in rig count last week has helped prices firm up well above the $50 a barrel mark. Only last week, crude oil settled at $44.45 a barrel, the lowest settlement in almost six years.

Although the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, has stated it is comfortable with oil at current prices, it is believed that producers in the U.S. and Canada will be crippled by $25-45 oil.

Oil major BP said this morning it is now taking action to respond to the likelihood of oil prices remaining low into the medium term and to re-balance its sources and uses of cash accordingly.

Light Sweet Crude Oil futures for March delivery, the most actively traded contract, soared $3.48 or 7.0 percent to settle at $53.05 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for March delivery scaled a high of $54.17 a barrel intraday and a low of $49.69.

On Monday, crude oil settled at $49.57 a barrel, up $1.33 or 2.8 percent, as the dollar trended lower after some soft economic data from the U.S. and China.

The American Petroleum Institute's oil-inventory data is due later Tuesday, followed by U.S. Energy Information Administration's weekly data on Wednesday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 93.50 on Tuesday, down from its previous close of 94.56 late Monday in North American trade. The dollar scaled a high of 94.70 intraday and a low of 93.46.

The euro trended higher against the dollar at $1.1527 on Tuesday, as compared to its previous close of $1.1341 late Monday in North American trade. The euro scaled a high of $1.1528 intraday and a low of $1.1314.

On the economic front, a report from the Commerce Department Tuesday showed a sharp drop in new orders for U.S. manufactured goods in December, with factory orders tumbling by 3.4 percent, exceeding the 2.2 percent drop forecast by economists.

Eurozone producer prices declined at the fastest pace in five years during December, data from Eurostat showed Tuesday. Producer prices fell 2.7 percent year-on-year in December, faster than the 1.6 percent decline in the previous month. Economists had forecast a 2.5 percent fall for the month.

U.K' s construction sector expansion quickened unexpectedly in January, survey data from Markit Economics showed Monday. The Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 59.1 in January from the seventeen month low of 57.6 in December. The score was forecast to fall to 57 in January.

Consumer price inflation in the developed economies was at its lowest in five years during December, due mainly to falling energy prices, data from the Organization for Economic Cooperation and Development (OECD) revealed Tuesday. The consumer price index climbed 1.1 percent annually in December following 1.5 percent rise in November. This was the lowest since October 2009, when prices rose just 0.2 percent.

From Asia, China's current account surplus dropped to $61.1 billion in the fourth quarter, the State Administration of Foreign Exchange said Tuesday. Meanwhile, the capital account showed a deficit of $91.2 billion. For the full year 2014, China recorded a surplus of $213.8 billion and a shortfall of $96 billion on the capital account.