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Oil steadies as OPEC is seen ignoring pressure from Trump on output cuts

Key Points
  • Oil prices recover after steep drop on President Donald Trump's renewed pressure campaign on OPEC.
  • An OPEC source told Reuters OPEC would stick to its agreement to tighten crude supplies regardless of Trump's recent tweet.
  • The production cuts and U.S. sanctions on Iran and Venezuela are supporting prices.
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil futures steadied on Tuesday on signs that OPEC plans to maintain production cuts despite pressure from U.S. President Donald Trump, whose comment criticizing rising crude prices sent the market into a tailspin a day earlier.

Prices slid on Monday, when many traders were out of the office attending International Petroleum Week, a series of industry events in London, after Trump called on OPEC to ease its efforts to boost the oil market. Prices were "getting too high," the president said.

An OPEC source told Reuters on Tuesday OPEC would stick to its agreement to tighten crude supplies regardless of Trump's recent tweet.

U.S. West Texas Intermediate crude ended Tuesday's session roughly flat, settling 2 cents higher at $55.50. WTI plunged more than 3 percent in the previous session. 

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Brent crude, the global benchmark, rose 45 cents, or just over a half percent, to $65.21 on Tuesday. Brent lost 3.5 percent on Monday.

"The market has started to realize that Donald Trump can't tweet more oil out of the ground, or out of OPEC," said Phil Flynn, analyst at Price Futures Group in Chicago.

"OPEC really wants to get the supplies ... back in line," Flynn said.

Oil is up about 20 percent since the start of the year, when OPEC and non-member producers, such as Russia, began cutting production in an effort to reduce a global glut.

The OPEC source said the cartel, along with non-member producers, would continue its supply-cut agreement to balance the market until they see inventories fall to their five-year average. "There is no doubt we will continue with our reduction as planned," the OPEC source said.

The so-called OPEC+ alliance agreed in December to cut supply by 1.2 million barrels per day from Jan. 1 for six months.

U.S. sanctions against OPEC members Iran and Venezuela have also contributed to gains and are providing a floor for prices, analysts say.

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Growing optimism that the United States and China would secure a trade deal before by a March 1 deadline also boosted prices. Trump on Monday said he may soon sign an agreement with Chinese President Xi Jinping to end a months-long trade war between the two countries.

Investors are also looking ahead to weekly figures on U.S. crude inventories. U.S. crude stocks are expected to rise by 3.6 million barrels in weekly inventory reports.

The first such report is due at 4:30 p.m. ET (2130 GMT) from the American Petroleum Institute, following by more comprehensive government figures on Wednesday morning.

Libya's internationally recognized government agreed with the state oil company to reopen the country's largest oilfield, El Sharara, according to a statement on Tuesday. The development weighed on prices.

— CNBC's Tom DiChristopher contributed to this report.