AFP
New York, Nov 5: Oil prices rallied sharply on Tuesday amid a weaker dollar and on evidence that OPEC crude exporters were cutting production as promised,analysts said.
Prices jumped off a 21-month low point for Brent North Sea crude, as commodity prices jumped and financial markets reassessed the outlook for deep worldwide economic downturn.
In New York, the benchmark December contract for light sweet crude increased 6.62 dollars to close at 70.53 dollars a barrel, a surge of more than 10 percent
London's contract for Brent December delivery settled at 66.44 dollars a barrel, up 5.96 dollars from Monday's close.
The market action came as stocks rallied worldwide along with commodities and the dollar weakened -- a sign that investors are taking on more risk after a period of retrenchment.
"Commodity prices continue to bounce around. Wheat, soybeans and corn futures are all up slightly, along with base metals, including copper, aluminum and zinc," said Nathan Topper at Economy.com.
"Precious metals have also participated in the brief commodities rally."
A weaker dollar makes oil priced in the US unit cheaper for buyers holding stronger currencies, pushing up demand. On Tuesday the euro jumped briefly back above 1.30 dollars.
Financial markets were seeking to assess the impact of the US presidential election that could change the approach to the global financial crisis, as well as the series of actions by central banks and governments to shore up economic activity.
Analysts said that prices also rebounded on news that OPEC producers were implementing cuts to output, as was pledged at a meeting of the cartel last month.
"The major impetus to the overnight reversal in prices has been the news that the the United Arab Emirates has cut production by about 200,000 barrels per day from its normal output of 2.5 million bpd," said Mike Fitzpatrick at MF Global.
"More importantly, Saudi Arabia has told major oil companies that it will restrict the volume they can load this month, answering skepticism about the kingdom's compliance with OPEC's October 24 deal to cut output."
Algeria has slashed oil production by 71,000 barrels per day to honor the OPEC decision to reduce global daily output by 1.5 million bpd, the APS news agency reported Tuesday.
Algeria produced as many as 1.45 million bpd before the energy ministry implemented the cuts.
OPEC said last month it would reduce production to halt the slide in oil prices, which have lost more than half their value since striking record highs above 147 dollars a barrel in July when fears of supply disruptions sent them rocketing.
But OPEC's decision to slash output as of November 1 will not immediately shore up prices, the cartel's chief, Algerian Energy Minister Chakib Khelil, said last weekend.
The Organization of the Petroleum Exporting Countries, whose members pump about 40 percent of the world's oil, holds its next scheduled output meeting in Oran, Algeria, on December 17.