Michael Galvis: Oil Prices are Climbing back Up.

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 of output since September to re balance world markets.

A Reuters survey showed the group, which pumps one-third of the world’s oil, had carried out about 67% of its pledged, record curbs in January.

U.S. light crude for March delivery rose 25 cents to $40.33 a barrel by 7:15 a.m ET, having fallen to $39.83 on Monday, the first time below $40 a barrel in three weeks.

“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% and 6%, respectively, while U.S. crude lost only about 4%.

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