U.S. crude oil futures ended sharply higher, buoyed by an International Energy Agency report raising its forecast for 2007 world oil demand growth.
Crude futures also piggy-backed on a rebound in heating oil futures amid forecasts that severe cold in the U.S. Northeast last week could have caused a large drawdown in domestic distillate supplies.
News of a small fire that hit a crude distillation unit of Valero Energy in Delaware City, Delaware, on today added to the late surge in prices, some traders said.
The fire, the second at the 210,000 barrel-per-day (bpd) plant in five days, had been extinguished this afternoon, the company said.
On the New York Mercantile Exchange, March crude settled up $1.25 at $59.06, bouncing back from Monday's $2.08 loss. Trading ranged from $57.24 to $59.60. Resistance for the day was pegged at $60 with support at $57.
NYMEX March heating oil gained 4.78 cents or almost 3% to settle at $1.6932 a gallon. It traded from $1.6326 to $1.6998. Resistance was charted at $1.75 with support at $1.65.
NYMEX March RBOB settled up 5.64 cents or 3.6% to 1.6091 cents a gallon, trading $1.5514 to $1.6175. Resistance lurks at $1.63 with support at $1.50.
The IEA, energy adviser to 26 industrialized nations, raised its forecast for 2007 world oil demand growth, following revisions to its outlook for China, and told OPEC that any further supply cuts could markedly tighten the market.
Supply from non-OPEC producers was revised down by 70,000 barrels per day for 2007 to 50.5 million bpd, with growth expected to amount to 1.1 million bpd or 2.2%.
The IEA forecast was supportive for the market, Mike Fitzpatrick, vice president for energy risk management at Fimat USA, said in a research report.
Other analysts said traders were factoring in a potentially large draw in U.S. distillate stocks, chiefly heating oil supplies, when the U.S. Energy Information Administration releases its inventory report for the week to Feb. 9 at 10:30 a.m. New York time on Wednesday.
"The market is looking for a big distillate draw tomorrow... that's why (crude/heating oil) prices are up," said Amanda Kurzendoerfer, analyst at Summit Energy in Louisville, Kentucky.
The average forecast in an expanded Reuters poll of analysts on Monday called for a draw of 4.2 million barrels in distillates, including heating oil, a build of 1.2 million barrels in crude stocks and an increase of 1.9 million barrels in gasoline supplies.
Refinery runs were seen rising 0.2 percentage point to 87.5% of capacity.
Inventory data were slated to be released by the U.S. Energy Information Administration at the regular time of 10:30 a.m. New York time on Wednesday despite a winter storm which was
approaching Washington, D.C. and caused the early closure of federal offices Tuesday afternoon.
On Monday, prices fell steeply on expectations that OPEC will keep output targets steady when the group meets in March helped trigger Monday's slide.
Saudi Oil Minister Ali al-Naimi said in an interview with The Wall Street Journal on Monday that if the trend toward better market balance continues there may not be any reason to change production.
In the U.S. Northeast, heating demand will average above to much above normal the next five days, private forecaster DTN Meteorlogix said today. The six-to-10-day Meteorlogix forecast called for below normal temperatures.
Private firm AccuWeather on Monday forecast U.S. Northeast temperatures to remain below normal for next week, but with highs climbing to above normal levels later in that week.