US oil settles at $53.40 a barrel, up 32 cents after Saudi Arabia says it wants output cuts extended

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Crude oil turned positive on Tuesday, reversing course on reports that Saudi Arabia has told OPEC officials it wants to continue OPEC cuts for an additional six months.

Oil futures have been pinned in a range, supported by production cuts from OPEC and other states but capped by rising U.S. shale oil production.

The market turned positive after reports that Saudi Arabia told OPEC officials it wants to extend production cuts enacted in January for another six months when the group meets in May, according to the Wall Street Journal. OPEC members have previously said they lean toward oil cut extensions, so long as non-members are also involved.

U.S. West Texas Intermediate (WTI) rose by 32 cents to $53.40 a barrel after touching a five-week high of $53.37.

Brent crude, the international benchmark for oil, was up 19 cents from its previous close at $55.93 per barrel. Earlier in the session, Brent had climbed to its highest since March 7 at $56.16.

Don't expect oil prices above mid-$50 range: Schork Report

Brent has risen in each of the previous six sessions, while WTI gained for the last five days. Early in the day, prices had retreated on expectations U.S. inventories could climb again.

Analysts said there are worries demand growth could falter, and other indicators were warning that the market had not yet cleared enough of its surplus to keep prices rising.

"There's a lot of heightened geopolitical tension on two fronts," said Phil Streible, senior market strategist at RJO futures in Chicago. Rising concerns about North Korea and Syria may depress oil demand, he said.

North Korean state media warned on Tuesday of a nuclear attack on the United States at any sign of American aggression as a U.S. Navy strike group steamed toward the western Pacific.

Crude oil prices reflect rising Middle East tension: Strategist

U.S. President Donald Trump said in a Tweet North Korea was "looking for trouble" and the United States would "solve the problem" with or without China's help.

"Geopolitical tensions are bad for global demand growth," said Olivier Jakob, managing director of Petromatrix, noting rising acrimony between the United States and North Korea.

He also said the widening discount of the current Brent crude price to the contract in the next month is "basically telling you the market is not actually that tight."

U.S. crude inventories have touched record highs at the U.S. storage hub of Cushing, Oklahoma and in the U.S. Gulf Coast in recent weeks, according to U.S. government data.

A Reuters poll of analysts forecast a rise in U.S. crude inventories for a fourth straight week.

Data from industry group API is due out on Tuesday, while figures the U.S. Energy Information Administration will be released on Wednesday.