Crude oil hits 7-day high after OPEC lifts demand outlook

Investing.com - Crude oil futures erased earlier losses to hit a seven-day high during U.S. morning hours on Tuesday, after the Organization of Petroleum Exporting Countries lifted its forecast for global oil demand.

Meanwhile, the spread between New York-traded crude and London-traded Brent narrowed as investors unwound spread trades put in place earlier in the month.

On the New York Mercantile Exchange, light sweet crude futures for delivery in March traded at USD97.42 a barrel during U.S. morning trade, up 0.4% on the day.

New York-traded oil prices held in between a tight range of USD96.69 a barrel, the daily low and a session high of USD97.78 a barrel, which was the strongest level since February 1.

Crude prices rose to the highest levels of the session after OPEC hiked its forecast for global oil demand for 2013 due to stronger fuel demand in emerging economies.

In its monthly report, OPEC said it will need to provide an average of 29.8 million barrels a day in 2013, or 100,000 a day more than it estimated a month ago.

Oil prices also found support as the dollar index gave back earlier gains and entered negative territory after a Group of Seven statement said members won’t target exchange rates.

The G7 reaffirmed its commitment to market determined exchange rates, saying that countries will not target exchange rates and warned that excessive volatility can have “adverse implications” for economic and financial stability.

The statement came ahead of G20 meeting starting Friday, which is likely to feature discussions on competitive currency devaluations.
 
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.15% to trade at 80.27, erasing an earlier gain of as much as 0.25%.

Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.

Oil traders now looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 2.9 million barrels.

Investors were also awaiting President Obama's State of the Union speech later Tuesday for any indications of an agreement to avert automatic tax hikes and spending cuts due to take effect on March 1.

The U.S. is the world’s largest oil-consuming country, responsible for 22% of global oil demand

Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery added 0.3% to trade at USD118.52 a barrel, with spread between the Brent and crude contracts contracting to USD21.10 a barrel.

The spread widened to more than USD23 on Monday, as ongoing concerns over a glut of oil in the Midwest pressured New York-traded futures.

London-traded Brent futures rose to a nine-month high last week amid indications of strong demand from China and lingering worries about supply disruptions due to conflict in the Middle East and North Africa.