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Oil jumps $2, breaking range as supply seen ebbing

By Barani Krishnan
A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford

By Barani Krishnan

NEW YORK (Reuters) - Oil prices jumped as much as $2 a barrel on Tuesday, breaking out of a month-long trading range on a mix of technical buying and U.S. government data suggesting that the global supply glut could be ebbing.

Global benchmark Brent crude <LCOc1> rallied for a third straight day and was set to settle above $50 a barrel for the first time in a month. This convinced some dealers that there was little chance prices would slide back to the 6-1/2-year lows touched in August.

Early gains were fueled by a new U.S. government forecast for tighter oil supplies next year, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. The rally accelerated above $50 on chart-based buying and a weakening dollar.

Brent <LCOc1> was up $2.40, or 4.8 percent, at $51.65 a barrel by 12:11 p.m. EDT (1611 GMT), breaking out of the $47-$50 band prices have traded in since early September. Its session peak, a penny shy of $52, was the highest since Sept. 3, and took three-day gains to more than 7 percent.

West Texas Intermediate (WTI), the U.S. crude benchmark <CLc1>, rose by $1.75, or 3.7 percent, to $48.01.

"We have reduced the probability of a return to the $37-$38 area per nearby WTI," said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in North Wabash, Chicago. "We will maintain a longstanding view that price declines below this support level are virtually off of the table."

Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, according to a monthly U.S. energy report that suggests a surplus of crude is easing more quickly than expected.

Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the U.S. Energy Information Administration said in its Short-Term Energy Outlook. Demand is expected to rise 270,00 bpd to 95.2 million barrels a day, up 0.3 percent from September's forecast.

Russia's energy minister said Russia and Saudi Arabia discussed the oil market in a meeting last week and would continue to consult each other.

OPEC Secretary-General Abdullah al-Badri said at a conference in London that OPEC and non-OPEC members should work together to reduce the global supply glut.

Iran's crude sales were on track to hit seven-month lows as its main Asian customers bought less than before.

(Additional reporting by Karolin Schaps in London and Aaron Sheldrick in Tokyo; Editing by David Evans, William Hardy, Bill Rigby, W Simon, Jonathan Leff and David Gregorio)