Investing.com -- Crude oil futures surged on Monday, experiencing one of its highest daily-gains of the year, amid the rising cost of Saudi Arabian oil for Asian delivery and hopes for reduced output in the U.S.
On Sunday night, Saudi Arabia announced it is raising oil prices for May sales to Asia, marking the second straight month it has instituted a price hike for Asian buyers.
On the Intercontinental Exchange (ICE), brent crude for May delivery soared 5.94% or 3.23 to 58.23 a barrel, amid increasing margins for refiners. Prices for oil futures fell below $56 a barrel in U.S. morning trading before increasing steadily throughout the trading session to settle at $58.10.
On the New York Mercantile Exchange, WTI crude for May delivery also surged $3.00 or 6.04% to $52.14 a barrel, before falling slightly back to $52.06. Future prices for Texas light sweet has not moved above $53 a barrel since Feb. 19. The spread between international and U.S. domestic benchmarks stood at $6.04, above Thursday's level of $5.81.
Output in Saudi Arabia, the world's largest exporter of crude, is approaching near-record levels. The surge in Saudi output has offset poor production in Iraq due to unseasonable winter weather and in Libya, where production has stalled due to increased fighting.
Last Thursday, WTI crude futures plummeted to $48.75 a barrel after reports surfaced that Iran reached a preliminary accord with Western powers on enhanced limitations for its nuclear program. The deal resulted in the easing of economic and financial sanctions against Iran, fueling speculation that a glut of Iranian oil could be released into an already saturated market.
Still, questions remain on how quickly Iran's oil export can be released into the broader market. While the agreement allows U.S. president Barack Obama to temporarily suspend financial sanctions against Iran, he still needs Congressional approval to halt the sanctions permanently. Facts Global Energy, an energy consulting firm, forecasts that the Iranian oil exports could reach a level of 1.7 million barrels per day within 12 months, up from its current level of roughly a million barrels per day. The predictions may be overstated, however, if the sanctions are not fully lifted until 2016.
It is unknown how much the added supply level could further depress prices.
Meanwhile, renowned oil trader Andy Hall continued to take a bullish stance on crude futures. Reiterating comments he made in February, Hall said it might take a little longer than previously anticipated for "lower prices to work its magic." In February, Hall said he considered $40 a barrel as an "absolute price floor," for crude. Hall is the head of commodities trading at Astenbeck Capital, a $3.1 billion Hedge Fund in Connecticut.
Hall's bullish position comes in the wake of soft U.S. supply data from the Energy Information Administration (EIA). Last week, the EIA reported a drop in crude production – marking the first time crude output had declined since late December. Rig counts, meanwhile, fell by 11 last week to 802, according to energy service firm Baker Hughes (NYSE:BHI), as the figure declined for the 17th straight week.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, inched up 0.13% to 96.97, following Friday's weak U.S. jobs report.