Oil prices rose as much as 5 percent on Friday, lifted by fresh hopes over a proposed freeze in oil production and firm economic indicators from the United States and Germany that cast a positive light on growth in fuel demand.
Russia’s oil production could fall in April, sources said, while the country’s energy minister expressed hopes that producer nations could agree to an output freeze at a meeting in Doha later this month.
Front month U.S. West Texas Intermediate (WTI) crude futures were trading up $1.93, or 5.2 percent, at $39.19 per barrel at 8:50 a.m. ET (1250 GMT). International Brent futures were up $1.79, or 4.5 percent, at $41.22 a barrel.
“You have declining supply in the United States and a declining rig rate,” said Bjarne Schieldrop, chief commodities analyst with SEB Bank in Oslo. “You mix that with outages in Nigeria … and put Doha on top of it, and your eyes are looking towards the tightening of the market.”
Summer maintenance in the North Sea fields that form the basis of the Brent benchmark also helped boost near-term prices.
Bank of America Merrill Lynch said in a note that U.S. shale production was in “freefall” and that “as the global oil glut starts to clear, crude oil should lead the way”.
A rebound in financial markets also boosted optimism over demand. The U.S. Federal Reserve said the country was on the path of more economic growth, while rating agency Moody’s said Germany, Europe’s biggest economy, should see a slight acceleration in growth to 1.8 percent.
Still, some warned that oil prices could fall again, dragged down by a glut that will take time to clear and soaring production outside the United States, especially in parts of the Middle East.
“We believe the current oil price is unsustainable and expect a fundamental price recovery when markets move into better balance in mid- to late-2H16,” investment bank Jefferies said, adding that “the recovery could be protracted.”
Iraq said on Thursday that exports from its southern ports had hit almost 3.5 million bpd by April, up from an average of 3.29 million bpd in March, putting doubts on the feasibility of a planned meeting by major producers on April 17 to freeze output levels.
Iran, which was relieved from crippling international sanctions in January which had cut its crude exports to little more than 1 million bpd, has said it would only participate in a production freeze once it had regained its pre-sanctions levels of 4 million bpd, pouring cold water on any hopes that ballooning oversupply can be reined in soon.
ANZ bank said that there were signs that a renewed downtrend could be imminent for crude oil prices.
“Investors are lacking confidence about improved U.S. seasonal demand, as a decline in U.S. crude stockpiles (reported earlier this week) was mainly attributable to weaker imports and improved refinery utilisation,” ANZ bank said.