Oil Holds Steady Near $54

A stalled dollar takes off some of the bearish pressure.
By Elinor Arbel ,

Updated from 4 p.m. EST

Oil futures closed modestly higher Tuesday ahead of Wednesday's Energy Department inventory report.

The May crude contract added 18 cents to $54.23 a barrel in Nymex floor trading. Crude had fallen more than 5% since touching an all-time intraday high recently of $57.60. It was driven down by a strengthening dollar and chart-related selling on the part of commodity speculators. Gasoline prices rose about half a cent to $1.573 a gallon, near their all-time high of last Thursday.

Oil prices have been intermittently pressured by signals OPEC will follow through on a pledge to raise production by 500,000 barrels a day. The cartel, which produces 40% of the world's oil, talked prices down last week and is currently pumping about 27.5 million barrels a day.

"Fear of supply shortage has pushed people into owning gasoline and oil futures," said Jim Rollyson, vice president of energy equity research at Raymond James. Rollyson says excess in worldwide production capacity is the lowest in 30 years, raising concerns about any disruption in OPEC member output, such as strike threats in Nigeria. Tightness in oil tanker capacity as well as refining capacity also are contributing to a market squeeze, says Rollyson.

Extra production could show up in tomorrow's Energy Department inventory report. According to

Reuters

, analysts expect the report to show a 2.3 million-barrel build in crude stocks and a 1.5 million-barrel decline in gasoline stocks. Crude inventories currently stand near a three-year high.

The potential impact of swelling supplies wasn't lost on OPEC President Sheikh Ahmad al-Fahd al-Sabah, who counseled restraint in a meeting with reporters in Qatar.

"We have to be patient during this time and for the second quarter, because prices have not increased," he said, according to

Bloomberg

. "But I believe there will be an increase in production at the end of the second quarter because the market will need it."

Shares of major oil producers ended mostly lower:

ExxonMobil

(XOM) - Get Report

fell 62 cents, or 1.05%, to $58.27;

ChevronTexaco

(CVX) - Get Report

fell 40 cents, or 0.69%, to $57.89;

Royal Dutch/Shell

(RD)

dropped 5 cents, or 0.08%, to $59.27;

BP

(BP) - Get Report

rose 11 cents, or 0.18% to $61.58; and

ConocoPhillips

(COP) - Get Report

fell $1.62, or 1.54%, to $103.63.

Shares of

Unocal

(UCL)

rose 56 cents, or 0.95%, at $59.66 amid renewed takeover speculation. Potential suitors include ChevronTexaco, China's

CNOOC

(CEO) - Get Report

and the Italian oil giant

ENI

(E) - Get Report

, says energy analyst Bernard Picchi of Foresight.

"Unocal's exposure to south Asian resources makes it an attractive candidate," Picchi says. He thinks an offer could be between $60 and $70 a share.

Elsewhere in the energy sector, shares of

Dynegy

(DYN)

tumbled 19 cents, or 4.99%, to $3.62.

Williams

(WMB) - Get Report

also dropped 49 cents, or 2.66%, to $17.94, on what has become "just a bad trading day for oil stocks," one analyst said.

Most shares of independent exploration and production companies were trading down 1% to 6%.

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