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Brent Settles Above $118, Boosted by Hike in OPEC Outlook

Stephen Strathdee | E+ | Getty Images

Oil rose on Tuesday after OPEC in a monthly report raised the outlook for the amount of crude the group expects to need to produce in 2013 to keep supply and demand in balance.

Brent crude rose 53 cents, or 0.45 percent, to settle at $118.66 a barrel, having traded from $117.81 to $118.90.

The 12-member Organization of the Petroleum Exporting Countries said in its monthly market report that world oil demand will grow faster than previously thought this year.

"Overall, I would say the OPEC report is constructive and mildly bullish based on the demand forecast," said Dominick Chirichella, senior partner at Energy Management Institute in New York.

Oil was underpinned by a report that stated World oil demand will grow faster than previously expected in 2013, according to the U.S. Energy Information Administration. Rapid increases in the North American supply may not be enough to keep gasoline prices in check as spring approaches.

The EIA, the independent statistical arm of the Department of Energy, increased its forecast for demand growth by 110,000 bpd to 1.05 million bpd in 2013, taking global demand to 90.2 million bpd this year as the world economy recovers.

U.S. crude was up 40 cents at $97.43 a barrel.

The RBOB gasoline contract rose after losses on Monday following a less-damaging-than-expected blizzard in the U.S. Northeast over the weekend.

Supply worries stemming from conflict in the Middle East persisted on Tuesday, as investors eyed Iran's nuclear program more than North Korea's third nuclear test.

Tensions eased on Tuesday when Iran acknowledged it was converting some of its higher-grade enriched uranium into reactor fuel, a move that could help prevent a dispute with the West over its nuclear program hitting a crisis in mid-2013.

Israeli Prime Minister Benjamin Netanyahu said Monday the new centrifuges Iran was installing for uranium enrichment could cut by a third the time needed to create a nuclear bomb. Tehran says its nuclear programme is for peaceful energy purposes.

U.S. Oil Inventories

Oil markets also focused on weekly inventory data in top consumer the United States. U.S. commercial crude oil stockpiles are expected to have increased by 2.9 million barrels last week, a preliminary Reuters poll of four analysts showed on Monday.

Distillate stocks, which include heating oil and diesel fuel, were projected to be down 800,000 barrels on average, while gasoline inventories were seen unchanged.

Industry group the American Petroleum Institute is to release its weekly report at 4:30 pm EST (2130 GMT). The U.S. government's Energy Information Administration is set to follow with its own figures on Wednesday.

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