Big Rally for Crude Futures

Updated from 3:04 p.m. EST

The energy complex rallied Tuesday as traders bet that supply would tighten because of OPEC production cuts and declining stockpiles.

Nearby contracts for light, sweet crude added $2.96 to settle at $56.97 a barrel on the New York Mercantile Exchange. Natural gas futures rose 80 cents to $7.74 per million British thermal units.

Heating oil was up 9 cents at $1.64 a gallon, and gasoline was 8 cents higher at $1.52 a gallon.

"The cold weather has stabilized the market a bit, and traders are still waiting for some signs on inventories for [further] direction," says Michael Lynch, president of Winchester Mass.-based Strategic Energy & Economic Research. The Energy Information Administration is expected to report petroleum inventories at 10:30 a.m. EST Wednesday.

"I think eventually the market is going to recognize that there is ample energy available and that we'll finish the season with a surplus," he adds, saying oil could drop below $50 by the end of March.

In the meantime, Lynch says, traders will be watching for evidence of discipline from the OPEC oil cartel. The organization plans to cut output by 500,000 barrels a day starting in February, but other planned reductions announced last year failed to stick.

Analysts have questioned whether member states have actually followed through to the extent they promised.