Investing.com -- Crude futures surged nearly 4% on Tuesday reversing losses from the overnight session, as Kuwait's OPEC governor hinted that the world's largest oil cartel could be willing to slash production to curtail a persistent downturn in prices.
On the New York Mercantile Exchange, WTI crude for March delivery traded in a broad range between $29.25 and $32.19 a barrel, before settling at 31.45, up 1.07 or 3.48% on the day. In overnight, Asian trading, U.S. crude futures briefly dipped below $30 a barrel, amid continuing signs of weakening demand in China. A session earlier, the front month contract for WTI crude slumped nearly $2 a barrel, halting a two-day winning streak when Texas light, sweet futures surged more than 15%.
On the Intercontinental Exchange (ICE), brent crude for April delivery wavered between $30.12 and $33.25 a barrel, before closing at 32.56, up 1.25 or 3.90% on the session. North Sea brent crude futures are still down approximately 10% on the month, remaining near their lowest levels since 2003. Both the international and U.S. domestic benchmarks of crude jumped more than 6% on the session, before paring some of the gains in the final hours before the close of trading.
Crude prices rallied in U.S. morning trading after Nawal al-Farzaia, Kuwait's OPEC governor, made bullish comments on the possibility that the cartel could reduce supply levels in an effort to stem record-low price declines. Speaking at an energy forum in Kuwait, Al-Farzaia indicated that OPEC could be open to lowering its production if its rivals outside the cartel follow suit.
"OPEC is willing to cooperate with producers outside the group if they show that they are serious about cooperating with OPEC," Al-Fuzaia said. "Non-OPEC producers keep on making statements that they are willing to cooperate, but the reality is different."
While OPEC production tumbled by 211,000 bpd in December, amid declines from Saudi Arabia, Kuwait and Iraq, its production hovered near record-highs, remaining above 32 million barrels per day for the third consecutive month. When top OPEC officials reportedly met with Russia before its semi-annual meeting in Vienna last month, the two sides were unable to reach an agreement to lower their respective production ceilings. As a result, both Russia and Saudi Arabia are projecting massive budget deficits this year, as crude prices slump below $40 a barrel for the eighth consecutive week. Although Al-Fuzaia indicated that she doesn't expect oil to return to triple-digit highs from June 2014, she said Tuesday that prices could linger around the $40 to $60 level through 2020.
Investors await the release of the American Petroleum Institute's weekly crude stockpile report after the close of trading on Tuesday to help measure demand among the world's largest consumer of oil. Separately, Wednesday's report from the U.S. Department of Energy could show that domestic crude inventories rose by 3.5 million barrels for the week ending on January 22.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, reached an intraday high of 99.51 before turning negative in U.S. afternoon trading at 99.20, down 0.15% on the session.
The index remains near 12-month highs from December, when it eclipsed 100.00. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.