By Edward McAllister
Saudi Arabia has reduced exports after the Organization of the Petroleum Exporting Countries agreed last month to lower output, according to trade sources, with some estimating the world's top exporter had cut shipments by around 900,000 barrels per day from a peak in August.
U.S. crude settled up $6.62 at $70.53 a barrel. London Brent crude rose $5.96 to settle at $66.44 a barrel.
Crude prices have plummeted from a record above $147 a barrel in July as the global credit crisis hit the wider economy, damping fuel demand in major consumer nations, including the United States.
The steep drop prompted OPEC to agree to reduce output by 1.5 million bpd at an emergency meeting last month, and some members have called for additional reductions.
"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," Mike Fitzpatrick, vice president at MF Global, wrote in a research note.
Venezuela said it had informed its clients of supply cuts that began on November 1 and added it will propose a further output cut of 1 million barrel bpd at the next OPEC meeting in December.
U.S. stocks climbed on Tuesday as the presidential election result promises to resolve a key question overhanging the market, with investors picking up shares trading around five-year lows amid further signs of easing in global credit markets.
Further support came as the dollar endured its biggest one-day drop against a basket of currencies in 13 years, with investors betting global interest rate cuts will stimulate growth and alleviate the global financial crisis.
Earlier this year, investors rushed into commodities as a hedge against inflation and the weak greenback.
"The Saudi cuts were the main oil-related news, but the dollar had a big reversal lower," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
Democrat Barack Obama and Republican John McCain faced the verdict of U.S. voters after a long and bitter struggle for the White House, with Obama holding a decisive edge in national opinion polls.
U.S. gasoline demand edged up 1.3 percent last week from the previous week as national average prices for the fuel dropped, according to Mastercard advisors, although it remained 3.9 percent below year-ago levels.
In addition to Saudi Arabia and Venezuela, other OPEC members were also showing signs of throttling back output.
The United Arab Emirates has reduced its production to around 2.3 million bpd from around 2.5 million bpd, a top state oil company official said on Tuesday.
Algeria was reducing oil output by 71,000 bpd in line with OPEC's supply cut decision, the Algerian official news agency APS said on Tuesday, quoting the country's Energy and Mining Ministry.
Qatar has cut exports to Asia by about 40,000 bpd, effective this month, Energy Minister Abdullah al-Attiyah told Reuters.
An updated poll of analysts ahead of U.S. weekly government inventory data forecast U.S. crude oil stocks rose by 1.1 million barrels last week. The analysts predicted a rise of 1.4 million barrels in distillate inventories and a decline of 800,000 barrels in gasoline stocks.
(Additional reporting by Gene Ramos and Robert Gibbons in New York, Jane Merriman and Joe Brock in London; Editing by Marguerita Choy)