Oil snaps 5-day losing streak

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NEW YORK (CNNMoney.com) -- The price of oil rose Tuesday, ending five days of declines, after Saudi Arabia signaled additional production cuts and Fed chairman Ben Bernanke said stimulus plans could aid an economic recovery.

Light, sweet crude for February delivery rose 19 cents to settle at $37.78 a barrel. Oil opened lower but rose to a session high of $39.50 a barrel before trimming gains latter in the day.

On Monday, oil tumbled more than $3 a barrel as the market focused on a recent spate of grim economic news and bet that demand for energy would remain weak.

Saudi Arabia: Ali al-Naimi, Saudi Arabia's oil minister, told reporters in New Delhi that the Kingdom plans to reduce output even further than its previous target, according to Reuters.

Members of the Organization of the Petroleum Exporting Countries, which control 40% of global oil supplies, have been scaling back production in an attempt to put a floor under the rapidly declining price of crude.

Last month, the cartel said it would cut production by 2.2 million barrels a day starting Jan. 1.

As part of that plan, Saudi Arabia was to lower output to 8.05 million barrels per day in February from 8 million per day in January. But output "will be lower than the target," Naimi said.

However, the aggressive new move is a "double-edged sword," said Phil Flynn, senior market analyst at Alaron Trading in Chicago.

"If the Saudis have to cut production more, it's a sign that demand is very weak," Flynn said.

The global economic recession has severely undermined demand for oil and gasoline. Oil lost more than half its value in 2008 and suffered a staggering decline of more than $100 a barrel from its peak last summer.

Economy: Oil prices were bolstered after Federal Reserve chairman Ben Bernanke said proposed economic stimulus plans could help turn the economy around.

Bernanke, speaking in London, said the nearly $800 billion plan being discussed by the incoming Obama administration and the newly elected Congress "could provide a significant boost to economic activity." He warned, however, that additional bailouts of financial institutions may also be needed to bring about a sustained economic recovery.

"Bernanke's comments really gave us a shot in the arm," Flynn said.

EIA outlook: A report from the Energy Information Administration highlighted the market's concerns about waning demand.

In its monthly Short-term Energy Outlook, the EIA said real GDP, the broadest measure of economic activity, would decline by 2% in 2009, "leading to decreases in domestic energy consumption for all major fuels."

World oil consumption is projected to fall by 800,000 barrels per day, while the price of crude is expected to average $43 a barrel this year, according to the EIA.

"The oil price path going forward will be driven mainly by the depth and duration of the global economic downturn, the pace and timing of the recovery, and actual OPEC production," the report said.

The outlook comes one day before the EIA releases its weekly inventory report. Analysts expect that the nation's stockpiles of crude expanded last week after growing by 6.7 million barrels in the week ended Jan. 2.

Gasoline, heating oil: Retail gasoline prices held steady overnight, according to a survey by the American Automobile Association.

The national average price for a gallon of regular unleaded gasoline stands at $1.790 a gallon, unchanged from Monday.

Gas prices fell two-tenths of a cent on Monday after rising for twelve consecutive days.

Separately, heating oil prices rose rose 3.6% amid forecasts for cold weather in many parts of the country.

Heating oil for February delivery gained nearly 4 cents to $1.5255 a gallon.