Energy

US crude settles at $55.93, snapping 4-session losing streak

Reuters with CNBC.com staff
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U.S. oil prices rallied abruptly at midday on Tuesday, reversing earlier losses on what traders said was a mix of profit-taking on crack spreads and positioning ahead of WTI options expiry later in the day.

WTI crude settled 2 cents higher at $55.93 per barrel, after peaking at $57.15 earlier.

The Brent crude contract for January deliver, which expires after Tuesday's close, fell $1.31 to $60 a barrel. Brent's low of the session was $58.50, a level it has not touched since June, 3, 2009, when it dipped to $58.41.

Again Capital founder John Kilduff told CNBC buyers stepped in this morning for the first time in days after WTI reached a key support level of $53.95.

Vincent Kessler | Reuters

International benchmark Brent crude has roughly halved since reaching a 2014 high of $115 a barrel in June on ample supply and slowing demand, and a switch in strategy by exporter group OPEC to defending market share rather than prices.

A report showing Chinese industrial activity shrank for the first time in seven months in December added to concern about oil demand. China is the second-largest oil consumer after the United States.

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"The trend remains down," said Robin Bieber, technical analyst and director at London-based oil broker PVM Oil Associates. "It is not advised to be long.''

Weakening emerging-market currencies and economies—the drivers of growth in global oil demand—also weighed on prices, analysts said.

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In Russia, one of the world's largest oil producers, the central bank hiked its key interest rate by 6.5 percentage points to 17 percent on Tuesday in an attempt to halt a collapse in the ruble.

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In India, the Reserve Bank has been intervening in support of the struggling rupee in recent sessions, triggered by a worsening trade deficit, and in Indonesia the rupiah dropped to its lowest in 16 years against the U.S. dollar.

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"The sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity-producing emerging markets in Latin America and the Middle East,'' Goldman Sachs said in a report.

"Historically these regions didn't contribute much to oil demand, today they do.''