U.S. oil futures reverse losses ahead of API supply report

Investing.com - West Texas Intermediate oil futures turned higher on Tuesday, as traders looked ahead to weekly data on U.S. stockpiles of crude and refined products later in the day.

On the New York Mercantile Exchange, crude oil for June delivery hit an intraday low of $56.09 a barrel, before reversing losses to trade at $57.13 a barrel during U.S. morning hours, up 14 cents, or 0.25%. A day earlier, Nymex oil prices shed 16 cents, or 0.28%, to settle at $56.99.

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 1.4 million barrels in the week ended April 24.

Total U.S. crude oil inventories stood at 489.0 million barrels as of April 17, the most in at least 80 years, even as drilling activity fell.

U.S. oil futures have risen almost 16% in April due to mounting expectations that U.S. shale oil production has peaked and may start falling in the coming months amid an ongoing collapse in rigs drilling for oil.

According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by 31 last week to 703, the lowest since October 2010. It was the 20th straight week of declines.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for June delivery slumped 14 cents, or 0.21%, to trade at $64.69 a barrel. On Monday, London-traded Brent futures declined 45 cents, or 0.69%, to close at $64.83.

Brent futures are up more than 15% so far in April as some investors bet that a bottom had been reached after a nine-month long rout. But prices are still down approximately 43% since June, when futures climbed near $116.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $7.56 a barrel, compared to $7.84 by close of trade on Monday.

Meanwhile, the dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.3% to trade at 96.62 early on Tuesday.

Market participants were looking ahead to the conclusion of the Federal Reserve's two-day monetary policy meeting on Wednesday, which could provide indications over the timing of a future rate hike.

A recent run of disappointing U.S. economic data dampened optimism over the recovery, fuelling speculation the Fed could delay hiking interest rates until late 2015, instead of tightening midyear.

Elsewhere, hopes for a breakthrough on Greece’s debt negotiations were boosted after Greek Prime Minister Alexis Tsipras reshuffled the team handling talks with the country’s international lenders, fuelling optimism that a deal will be reached by early May.

Athens must pay €780 million due to the International Monetary Fund on May 12, fuelling fears that the country could default on its debt be forced out of the euro zone.