NEW YORK Oil prices rise 4.7% to 55.04 a barrel

The U.S. plans to increase its oil reserves for an 'additional layer of protection.'
NEW YORK (AP) -- Oil prices settled above 55 a barrel Tuesday after the federal government announced plans to boost the country's emergency crude stockpile this spring at a rate of 100,000 barrels per day.
Analysts said, however, the rally may only last until today's supply data from the Department of Energy.
Light, sweet crude for March delivery on the New York Mercantile Exchange leaped 2.48, or 4.7 percent, to settle at 55.04 in New York. It was the largest one-day jump since Sept. 19, 2005. March Brent crude on London's ICE Futures exchange settled at 55.10, up 2.40 a barrel.
The Department of Energy said Tuesday it plans to increase the capacity of the Strategic Petroleum Reserve to 1.5 billion barrels from 691 million barrels. U.S. Energy Secretary Samuel Bodman called the move "a wise and prudent policy decision to provide an additional layer of protection."
Oil prices traded higher for most of the trading day, buoyed by falling temperatures in the Northeastern U.S. and rising tensions in Nigeria and Iran.
Market rally
The DOE's announcement propelled the market's rally, however, sending oil prices as high as 55.15 in late day trading.
"The key here is whether this represents a change in the larger price trend or whether this rally fizzles out and prices fall," said Tim Evans, an energy analyst at Citigroup Global Markets. "We don't know what the Department of Energy inventory report will show tomorrow. If inventories rose last week, then we could have downward pressure again."
Last week, the U.S. Energy Department reported the biggest increase in crude inventories in more than four years, which suggests energy prices may have farther to fall despite Monday's initial bounce. It said crude oil stockpiles rose by 6.8 million barrels to 321.5 million barrels in the week ended Jan. 12.
Growing crude inventories and unusually warm weather in the United States dragged oil prices below 50 a barrel last week for the first time since May 2005. But prices rallied Monday after a weekend storm, and seasonal temperatures persisted Tuesday as a cold front moved into the north-central U.S.
Word of caution
Tom Kloza of the Oil Price Information Service pointed out that the bounce in crude oil prices Tuesday could prove short-lived.
"When something like this breaks in the last hour of trading, it tends to produce an overly emotional response. Already, we're seeing prices back off in after-hours trading," Kloza said. In late afternoon electronic trading, crude oil fell back to 54.86 a barrel.
The average price for a gallon of regular is down 13 cents from 2.33 on Jan. 1 to 2.20 on Friday, a day after crude briefly fell below 50.
In other Nymex trading, heating oil futures gained nearly 6.7 cents to settle at 1.5752 a gallon, while natural gas rose 30 cents to settle at 7.620 per 1,000 cubic feet.