Investing.com -- U.S. crude futures surged to fresh yearly-highs, erasing all of their losses from a failed accord in Qatar over the weekend, as Iranian officials said Tuesday that its production could return to pre-sanction levels in two months, providing indications that the Persian Gulf nation might be willing to engage in talks aimed at freezing output when OPEC meets next in June.
On the New York Mercantile Exchange, WTI crude for June delivery traded in a broad range between $40.89 and $42.88 a barrel, before settling at $42.38, up 1.19 or 2.89% on the session. With the upward moves, WTI crude extended sharp gains from the previous session when U.S. crude futures staged a dramatic reversal to end the day above $41 a barrel. Earlier, the front month contract for WTI crude nearly dipped below $39, after Saudi Arabian officials hastily broke off talks in Doha on Sunday afternoon, renewing fears that oil prices will remain persistently low in the face of excessive global supply. U.S. crude futures have now soared more than 52% since touching down to 13-year lows on February 11 at $26.05 a barrel.
On the Intercontinental Exchange (ICE), brent crude for June delivery wavered between $42.60 and $44.50 a barrel, before closing at $44.05, up 1.14 or 2.66% on the session. At session-highs, North Sea brent futures came percentage point away from hitting 2016-yearly highs of $44.94 from last week. Although the rally in brent futures has not been as pronounced as its U.S. counterpart, brent is still up by more than 40% since falling to 12-year lows in mid-February.
The spread between the U.S. and international benchmarks of crude stood at $1.67, just above Monday's level of $1.66 at the close.
Crude futures rallied in overnight trading after Iran deputy oil minister Rokneddin Javadi told state-run news organization IRNA that he expects output to return to pre-sanction levels from 2011 by sometime in late-June. Separately, Iranian oil sources sent strong indications that the nation could be willing to enter negotiations regarding a potential production freeze when OPEC meets next on June, according to Reuters. In April, Iran has reportedly increased exports to 1.75 million barrels per day, up from 1.6 million bpd a month earlier, shipping data provided to Reuters shows. By June, Iran hopes to ramp up production to reach 2011 levels near 4 million bpd and exports of around 2.2 million bpd.
Separately, oil continued to receive upside pressure from a labor stoppage in Kuwait where thousands of workers struck for a third consecutive day while railing for public sector pay reforms. The labor storage forced officials to slash crude production to 1.5 million bpd, according to Kuwaiti agency KUNA, severely below last month's average output of 2.8 million bpd.
Energy traders await the release of the American Petroleum Institute's weekly crude inventory report after the close of trading for further indications on the supply-demand imbalance on domestic markets. While stockpiles at the Cushing Oil Hub in Oklahoma fell by 1.76 million barrels last week, a large portion was due to an outage at the TransCanada Keystone pipeline. In addition, the U.S. Energy Information Administration (EIA) also reported considerable declines in production for the week ending on April 6, marking the 11th time output has waned in the last 12 weeks. As a result, production fell below 9.0 million bpd for the first time since October, 2014.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.50% to an intraday low of 93.89, slipping below 94 for the first time in a week. The index is now percentage points away from hitting eight-month lows from last week.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.