Investing.com -- Crude futures rose sharply, amid heavy short covering, one day after suffering one of its worst single-day sessions on the calendar year, as investors continued to react to devastating wildfires in Canada and widespread changes in the leadership structure of Saudi Arabia's leading state-run oil company.
On the New York Mercantile Exchange, WTI crude for June delivery traded in a broad range between $43.04 and $44.76 a barrel, before settling at 44.66, up 1.22 or 2.81% on the session. With the gains, U.S. crude futures closed higher for the fourth time in five sessions. On the Intercontinental Exchange (ICE), brent crude for July delivery wavered between $43.33 and 45.60 a barrel, before closing at $45.55, up 1.91 or 4.38% on the session. North Sea Brent futures recovered on Tuesday after slumping nearly 6% one day earlier in one of its worst trading days over the last two months.
Energy traders continued to monitor the catastrophic fires in Canada, where estimates of the number of barrels being forced offline from the firestorms continued to rise. On Tuesday, Energy Aspects, a Canadian consulting firm, estimated that the wildfires in Alberta were responsible for bringing 1.6 million barrels per day of oil offline, up from estimates of 1 million bpd a day earlier. As oil company scramble to set a timetable for getting their production sites up and running, many have been forced to delay the timing of their workers' return to the area.
In Saudi Arabia, meanwhile, state-run company Aramco outlined plans to ramp up production in response to expectations of soaring demand. It came one day after the Saudi kingdom completed a major shakeup in energy circles by replacing longtime energy minister Ali al-Naimi with Khalid al-Falih, the chairman of Aramco. In addition, Aramco announced that it will increase output at the Shaybah Oil Field in the Rub Al-Khali desert by 33% over the next few weeks, bolstering total production to 1 million bpd in the Southeastern Saudi Arabian field.
"We’re seeing a global increase in demand," said Amin Nasser, CEO of Aramco. "We are looking at the current market status that, even though challenging, is an excellent opportunity for growth."
Elsewhere, energy traders await the release of weekly inventory data from the American Petroleum after the bell on Tuesday for stronger indications of the current supply-demand balance on U.S. domestic markets. Crude stockpiles in the U.S. are at their highest levels in more than 80 years and are perilously close to reaching full storage capacity. Separately, Wednesday's government report from the U.S. Energy Department's Energy Information Administration (EIA) is expected to show a small build in crude inventories, despite slight draws in gasoline and distillate fuel on the week.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, jumped more than 0.15% to an intraday high of 94.33, before falling back to 94.19 in U.S. afternoon trading. While the index is on pace for its sixth straight winning session, it is still down approximately 6% since early-December.
Dollar-denominated commodities such as oil become more expensive for foreign purchasers when the dollar appreciates.
Although U.S. crude futures have rallied considerably since touching 13-year lows in mid-February at $26.05 a barrel, they are still down by approximately 40% since November, 2014, when OPEC rattled global markets by abandoning a long-term strategy of favoring sharp price gains over market share.
"During the first three months of 2016, crude oil prices were relatively more volatile than in recent history. This elevated volatility occurred when overall oil prices were low, and volatility was driven by high uncertainty related to supply, demand, and inventories. Crude oil price volatility has declined since its peak in March. Prices have risen as concerns about future economic growth have abated and as inventory growth has slowed since the start of the year," the EIA said in a statement on Tuesday.