LONDON (Reuters) - Oil climbed back above $40 a barrel on Tuesday as some investors grew convinced that aggressive supply cuts by OPEC may finally be building a floor under crude prices.
Despite softening world energy demand, oil has held above the $40 mark in recent weeks, buoyed in part by OPEC's agreement to remove more than 4 million barrels per day (bpd) of output since September to rebalance world markets.
A Reuters survey showed the group, which pumps one-third of the world's oil, had carried out about 67 percent of its pledged, record curbs in January.
U.S. light crude for March delivery rose 25 cents to $40.33 a barrel by 1215 GMT (7:15 a.m. EST), having fallen to $39.83 on Monday, the first time below $40 a barrel in three weeks.
London Brent crude was 52 cents higher at $44.34.
"Prices do seem to have bottomed for now," said Kevin Norrish of Barclays Capital. "OPEC has probably taken more than enough off the market and there's a risk of over-tightening, in which case prices would go back up fairly swiftly."
Oil fell sharply on Monday as the worsening global financial crisis led to grim forecasts for fuel demand and U.S. refinery workers averted a strike that would have cut output.
U.S. gasoline and heating oil were especially hard hit, falling more than 9 percent and 6 percent, respectively, while U.S. crude lost only about 4 percent.
While protests ended in the U.S. energy sector, they could be about to start in OPEC producer Nigeria.
Nigeria's senior oil workers' union threatened to begin an indefinite strike from Monday unless the government improved security in the Niger Delta, the country's restive oil heartland.
Nigeria pumped about 1.75 million barrels per day (bpd) in January, versus its OPEC supply target of 1.67 million bpd, according to a Reuters survey.
Top exporter Saudi Arabia and neighboring Gulf OPEC members virtually met their supply targets, which analysts said would go some way in removing excess oil.
"OPEC cuts will begin to take effect on inventories in a few months and the market is pricing that in. The caveat is the economy," said Anthony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.
Slowing economic growth in the United States, Japan and other major consumers has dampened fuel use, swelled stocks and knocked more than $100 a barrel off the price of crude since its July 2008 peak near $150.
In addition, inventories in top consumer the United States were expected to grow yet higher.
U.S. crude inventory data were likely to show stocks rose for the sixth time in a row as refinery utilization remained curbed by seasonal maintenance and imports rose, according to a Reuters poll of analysts.
Analysts issued their forecasts ahead of weekly inventory data to be released on Wednesday by the U.S. Energy Information Administration. Industry group American Petroleum Institute will release its data on Tuesday.
$39.95