Getty Images A sharply weaker U.S. dollar Tuesday also contributed to gains for oil, which is traded in the greenback.
August West Texas Intermediate crude CLQ7, +0.61% rose 38 cents, or 0.8%, to settle at $46.40 a barrel on the New York Mercantile Exchange, but ended off the session’s high of $46.92. September Brent crude LCOU7, +0.72% on London’s ICE Futures exchange gained 42 cents, or 0.9%, to $48.84 a barrel.
Saudi Arabia is considering a 1 million barrel-a-day cut to its crude exports, according to a report Tuesday from the Financial Times, which cites a recent note to clients from Bill Farren-Price, a consultant at Petroleum Policy Intelligence. Farren-Price said the move would offset the rise in Libyan and Nigerian supplies.
“This is what OPEC has resorted to, export cuts in order to jawbone the market higher,” said Bill Baruch, chief market strategist at iiTRADER. “We believe that OPEC members are getting restless and instead of this news showing how stable a deal they have, its shows the holes.”
Oil producers that participate in the production-cut agreement led by the Organization of the Petroleum Exporting Countries have been concerned that rising output from OPEC members Libya and Nigeria, which don’t have a set limit under the pact, as well as the non-OPEC U.S., will outweigh their efforts to rebalance the oil market.
OPEC is set to meet with other major oil producers in Russia on July 24.
“If anyone is getting restless, we believe it to be the Russians,” said Baruch.
Adding to the oversupply concerns is Ecuador’s decision not honor the OPEC-imposed production caps any longer, saying the cash-strapped and debt-ridden country can’t afford to keep curtailing its output amid low prices. It had originally pledged to cut 26,000 barrels a day. In May, Ecuador’s daily production was at 528,000 barrels a day, around 1.6% of the cartel’s total production.
Ecuador’s move heightens the possibility that other OPEC states may also turn their backs on the pact in the wake of rising production from the U.S., Libya, and Nigeria.
On Monday, oil prices fell about 1% and finished with their first loss in six sessions. That came as the Energy Information Administration said U.S. shale-oil production will likely notch a 113,000-barrel a day rise in August from the previous month to hit 5.585 million barrels a day. That would mark an eighth-straight monthly climb.
“There is little sign as yet that U.S. oil production is stagnating despite average U.S. oil prices holding below $50 per barrel for most of the past three months,” said Rob Haworth, senior investment strategist at U.S. Bancorp Wealth Management. “In our view this reflects solid economics for U.S. drillers and the availability of affordable oil production even at these low price levels.”
The rebound Tuesday, however, came as the dollar fell following a decision by Senate Republican leaders to scrap a vote on legislation to repeal and replace Obamacare. A weaker dollar tends to help commodities priced in the currency as it makes them less expensive to users of other currencies.
Investors will be watching for the Energy Information Administration’s weekly production and stocks report due Wednesday. S&P Global Platts estimates U.S. commercial stocks to register a 3 million barrel drawdown. The American Petroleum Institute will release its own report on U.S. supplies late Tuesday.
Back on Nymex, August gasoline RBQ7, +2.02% added 2.2 cents, or 1.4%, to $1.579 a gallon and August heating oil HOQ7, +0.67% rose 1.1 cents, or 0.7%, to $1.510 a gallon.
Natural-gas prices, meanwhile, climbed, with warmer weather forecasts expected to lift demand. August natural gas NGQ17, +2.05% finished at $3.088 per million British thermal units, up 6.9 cents, or 2.3%.
—Victor Reklaitis contributed to this article