NEW YORK (Reuters) - Oil closed up after a weak start on Tuesday, with Brent crude rising to a 2015 high of $63 a barrel as short-covering returned to a market depressed earlier by worries about euro zone stability.
Threats to Middle East crude production and the falling U.S. oil rig count seemed to spur market bulls despite global inventory data suggesting an oversupply of up to 2 million barrels per day, analysts and traders said.
“We’re in this mode where the market continues to discount bearish news,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “Certainly there is some positive news out there about Libya and rest of the Middle East, but I don’t see anything that’s overly bullish.”
Options for the front-month March contract in U.S. crude oil also expired on Tuesday, possibly adding to the rebound, brokers said. A similar upward move was observed a month ago when options expired in the previous front-month contract for U.S. crude.
Brent oil’s front-month contract for April delivery LCOc1 settled up $1.13 at $62.53 a barrel, rebounding from the day’s low of $60.27. The session peak of $63 was the highest since Dec. 18.
U.S. crude futures for March CLc1 closed up 75 cents at $53.53, versus an intraday low at $50.81.
Oil prices slumped about 60 percent between June and January on fears of a supply glut. Since February began, they have rebounded more than 10 percent on short-covering spurred by speculation that the market had hit bottom and concerns about fighting in the Middle East.
Violence in Libya has shut all major ports and oil exports from the country have collapsed to just a trickle.
Iraq’s semi-autonomous Kurdistan Regional Government has threatened to withhold oil exports if Baghdad failed to send its share of the budget.
The International Energy Agency’s chief economist Fatih Birol said on Tuesday the rise of Islamic State presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.
Market bears, meanwhile, point to a Reuters poll that shows U.S. commercial crude oil stockpiles likely rose again in the week ended Feb. 13 to record highs above 420 million barrels. [EIA/S]
Oil was down earlier in the day after Greece rejected an international bailout plan. In east Ukraine, pro-Russian rebels and government forces fought street-to-street, further dampening hopes that a European-brokered peace deal will end the conflict.
Additional reporting by Alex Lawler in New York and Henning Gloystein in Singapore; Editing by Dale Hudson, Jessica Resnick-Ault, Chris Reese, Tom Brown and Chizu Nomiyama