Oil rises on U.S. output dips, Middle East tensions

By Robert Gibbons

NEW YORK (Reuters) - Crude oil futures rose on Tuesday on signs of falling U.S. oil production, weakness in the dollar and tensions in the Middle East, particularly Yemen.

North Dakota's February oil production fell 15,000 barrels per day (bpd) versus January, monthly data showed on Tuesday, though the number of producing wells hit a record high.

"Today's (U.S.) led crude spike was spurred primarily by supportive supply side headlines suggesting a quicker production response to rig declines than previously anticipated," said Jim Ritterbusch, president at Ritterbusch & Associates.

North Dakota's report followed the U.S. Energy Information Administration's (EIA) Monday report that it expects U.S. shale production to fall by 45,000 bpd to 4.98 million bpd in May, which would be the first monthly decline in four years.

 

Shale production helped boost U.S. output by more than 4 million bpd since 2010, a factor in oil's stunning price retreat since June.

Ahead of Wednesday's May contract expiration, Brent rose 50 cents to settle at $58.43 a barrel, just above its $58.40 100-day moving average. Brent also was above that average intraday Monday.

U.S. May crude rose $1.38 to settle at $53.29, surging above its 100-day moving average of $52.96.

The moves above their 100-day moving averages, a level closely watched by market technicians, were the first since July 20014.

The dollar's weakness also helped boost dollar-denominated oil prices, brokers said. [USD/]

Also supportive to oil were tensions in the Middle East, where fighting continued in Syria, Iraq and Yemen. Analysts fear Yemen's civil war could destabilise neighbouring Saudi Arabia.

Iran said it will submit a peace plan for resolving the crisis in Yemen to the United Nations on Wednesday.

Iranian Oil Minister Bijan Zanganeh was quoted on Tuesday as saying OPEC should cut its target oil production by at least 5 percent, or approximately 1.5 million bpd.

Saudi Arabian oil minister Ali al-Naimi discussed oil markets on Tuesday with Russia's ambassador to Riyadh Oleg Ozerov.

Saudi Arabia's March production at 10.3 million bpd was considered bullish and incremental internal demand could "substantially reduce global spare capacity," energy information provider PIRA Energy Group said in its weekly report on Tuesday.

Traders awaited a snapshot on U.S. oil inventories from the American Petroleum Institute due at 4:30 p.m. EDT on Tuesday. Crude stocks are expected to have risen last week. [EIA/S]

(Additional reporting by Christopher Johnson and Himanshu Ojha in London and Henning Gloystein in Singapore; Editing by Crispian Balmer, David Evans and W Simon)