Oil Prices Surge to One-Month High

Oil prices soared to a one-month high on Tuesday, providing investors some respite from a prolonged selloff that rattled financial markets, the energy sector and oil-dependent economies.

U.S. oil futures were on track to notch a fourth consecutive gain, their longest winning streak since August. Prices have risen about 20% in that time. Recently, the benchmark crude-oil contract on the New York Mercantile Exchange was up 7.1% at $53.35 a barrel.

Despite the jump in oil prices, few investors and analysts are willing to call a bottom to a downdraft that began in July, the magnitude of which caught many market experts by surprise. Plunging oil prices in recent months, driven by a global glut of crude oil, pummeled shares of oil companies and the currencies of oil-producing nations. The decline also prompted cutbacks to energy spending and investment, potentially sowing the seeds for a sustained recovery in prices.

Tuesday's rally came in response to a U.S. refinery strike, which pushed up prices for petroleum products on concerns that the refineries could shut down fuel production.

"It's a pretty big move," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. "You have a sequence of events that has really spiked this market," including the refinery strike and announcements that major oil companies are cutting their 2015 spending plans, he said.

Refineries also typically close units in February and March to perform seasonal maintenance, which can boost product prices. Retail gasoline cost $2.07 a gallon, on average, in the U.S. on Tuesday, AAA said, up about a penny from Monday.

But the global crude market is still oversupplied, analysts say.

Money managers, including hedge funds, added a large number of bets on lower U.S. oil prices in January, according to data from the U.S. Commodity Futures Trading Commission. The recent rally is likely due to some of those traders closing out positions, said Andy Lebow, senior vice president of energy at Jefferies LLC. In futures markets, investors must buy contracts to close bearish bets. When many investors try to take profits at the same time, the scramble tends to exert upward pressure on prices.

"Oil products continue to rally," said Phil Flynn, analyst at the Price Futures Group, in a note. Though the refineries affected by the strikes say they will use nonunion labor to keep operating, "many are not certain if the refineries over the long run can maintain output," Mr. Flynn said.

Already, Tesoro Corp. announced plans to idle one refinery in California during the strike to perform seasonal maintenance.

Brent, the global benchmark, was 5.4% higher at $57.73 a barrel on ICE Futures Europe in recent trading.

Refineries are seeing better profits for turning crude oil into gasoline and other products, because there is more storage space available for oil products than for crude oil, according to London consulting firm Energy Aspects.

ICE gasoil was especially strong Tuesday, trading up 7% at $548.25 a metric ton. "In an oversupplied market, discounted crude oil is...reviving the profitability of European refineries," boosting gasoil prices, said Energy Aspects.

Gasoline futures rose 3.3% to $1.5975 a gallon, while diesel futures traded up 5.2% at $1.8487 a gallon.

Data released Friday showing a sharp drop in the number of rigs drilling for oil in the U.S. have also boosted prices. Some traders expect the cutback in drilling to lead to lower U.S. production, reducing the global glut of oil.

Gareth Lewis-Davies, an analyst at BNP Paribas, said investors were encouraged by the U.S. rigs data. But as the lag between falling rig counts and falling output is up to nine months, the price gains may not be sustained, he said. Global supply is still exceeding demand, and crude-oil stocks will continue to build for some time, he said.

RBC Capital Markets on Tuesday cut its Brent crude forecast for this year to $57 a barrel from $71 a barrel and lowered its Nymex crude forecast to $53 a barrel from $65 a barrel.

"World oil prices are searching for a bottom in a landscape characterized by excess supply," the bank said. "Severe capital spending cuts under way globally, in tandem with natural declines, are laying the groundwork for an oil price recovery to take shape during the second half of 2015 and into 2016."

Investors are tracking spending cuts and falling profits at major oil companies, as these will eventually lead to cuts in oil output.

BP PLC on Tuesday reported a quarterly loss and said it plans to postpone a number of projects. The company expects organic capital expenditure this year to total around $20 billion, significantly lower than its previous guidance of $24 billion to $26 billion.