Updated from 11:13 a.m. EST
Energy prices closed slightly higher Tuesday as worries about supply curtailments in Iran receded and traders focused on tomorrow's inventory report.
Light, sweet crude with an April delivery date settled at $61.65 a barrel, up 24 cents, on Nymex. The contract lost almost $2 on Monday after Russia and Iran reportedly reached an agreement over uranium enrichment.
Traders usually start focusing on supply levels ahead of the Energy Department's weekly fuel inventory report on Wednesday. Crude, which is currently 10% above last year's levels, is expected to show a 1 million-barrel gain, according to analysts polled by
"Apparently, the immediacy of a surplus trumps geopolitics, for a day or two anyway," said John Kilduff, an energy analyst with Fimat USA in New York. "The next two days will focus on stockpiles and moderating weather, then, as the weekend approaches, the focus will widen again to the world."
Crude could also get a boost Wednesday following a meeting between OPEC President Edmund Daukoru and U.S. Energy Secretary Samuel Bodman in Washington, DC. The talks come one week before the Organization of the Petroleum Exporting Countries, which pumps around 40% of the world's crude, meets March 8.
Crude helped drive up the rest of the energy complex, with heating oil closing up 2 cents at $1.72 a gallon and unleaded gasoline finishing at $1.59 a gallon, up 4 cents. Natural gas declined 7 cents to $6.71 per million British thermal units.
Despite a recent cold snap in the Northeast and forecasts of continued cold weather, high stock levels of natural gas are keeping prices low. There is now 24% more natural gas in storage than a year ago. Early next week, a winter storm was expected to drop more than six inches of snow along the I-90 corridor, according to forecasts from AccuWeather.com of State College, Pa.
"Gas supply is in solid shape, inventories are high, and with the exception of the current cold snap, not much on the horizon to suck up the excess," wrote Scott DeBusschere, director of BMO Nesbitt Burns' Calgary-based commodity derivatives group, in a client note.
The drop in oil prices was driving down energy indices and shares Tuesday. The Philadelphia Oil Service Sector Index, which tracks 15 companies, lost 0.4% and the Amex Oil Index dropped 1.2%.
lost 59 cents, or 1%, to $59.33;
was down 69 cents, or 1%, to $66.31, and
fell 73 cents, or 1.3%, to $56.37.
Oil prices fell Monday after Iran agreed to allow Russia to enrich uranium on its behalf. Tehran resumed nuclear development activities last month in disregard of Western threats to impose economic sanctions. Iran has said it needs nuclear power to generate more electricity to feed its growing population, and not, as the West suspects, to build atomic bombs.
The two sides have been meeting over the past two weeks in an attempt to head off a possible trade embargo. The U.N. Security Council next meets March 6 and was to take up action against Tehran. Economic sanctions would have slashed world oil stocks and driven up prices because there is not enough spare capacity to make up for Iran's oil production. Iran is OPEC's second largest oil-producer and produces nearly 4 million barrels of crude per day.
Last Friday, crude picked up more than $2 after an attempted bombing at a major Saudi Arabian processing facility. Saudi security forces kept the attack from succeeding by opening fire on the vehicles. There was no interruption to the flow of oil at the facility, which handles around two-thirds, or 6 million barrels a day, of Saudi Arabia's oil output. Attacks against Saudi Arabia could trim oil supplies around the world because the Middle Eastern country is essentially the only source of spare capacity in the world.