Brent crude futures were primed for their biggest monthly rise since May 2009 on the back of upbeat demand coinciding with supply disruptions in big oil producing countries.
ICE April Brent rose $2.53 to settle at $62.58 a barrel on Friday.
After seven months of losses, the international crude marker was up 18 per cent in February – the highest monthly rise in almost six years.
Its US counterpart, Nymex April West Texas Intermediate, rose $1.59 to $49.76 a barrel. It also notched its first monthly gain since June with a 3 per cent rise.
Lower prices have induced demand from buyers in Europe and China, said Olivier Jakob of Petromatrix, a consultancy.
“Strong demand for products such as gasoline and diesel is boosting demand for crude from refiners as they are seeing stronger margins,” he said.
“There is some fundamental support this month. But it is always difficult to tell if we’ve turned a corner [when it comes to underlying demand],” he added.
“A lot of people are still just stockbuilding.”
Concerns about relentless US output and sustained production from Opec members overwhelming a weaker global demand picture set an oil price fall in motion in June.
But after dropping by 60 per cent to nearly $45 a barrel last month, Brent crude has rebounded.
Supply disruptions in Iraq and Libya this month have also offered some support to the price.
Oil exports from Iraq’s southern fields dropped as poor weather delayed deliveries. Meanwhile, unrest in Libya, where fighting has shut down ports and oilfields, also curbed production.
But a stronger Brent market has coincided with continuing relative weakness in WTI, widening the spread between the two crudes to about $12 a barrel – the biggest it has been since January 2014.
Oil market participants have been holding out for signals pointing to US production cuts amid lower prices. Baker Hughes, the oil services group, said the number of rigs drilling for oil in the US fell by 33 this week to 986, the smallest decline this year. This added downward pressure on WTI on Friday.
Stocks at Cushing, Oklahoma, the delivery point for WTI, have been rapidly increasing and stand at record levels. This has increased the contango – industry jargon for when prices for delivery in the future are higher than in the spot market in US crude.
The price gap between the WTI futures contract for delivery in April and the subsequent contract, for delivery in May, now exceeds $2 a barrel.
That is the biggest divide between the so-called front month and next month contracts since February 2011.
“This is likely to continue in the coming weeks, partly because the pronounced contango in the WTI forward curve continues to make it attractive to stockpile in the US,” said Carsten Fritsch at Commerzbank.
But the recent strength in Brent crude has meant a popular trading strategy of buying oil on the cheap to store on tankers and locking in earnings when prices rise has become less profitable, according to traders.
“Oil market dynamics are changing,” said Paul Horsnell at Standard Chartered. “If you look at the three-month trend, it is becoming positive.
“Has the oil price bottomed? It probably has but it is very volatile.
“We went from a one-way street downwards, to two-way traffic, and now the path of least resistance is up.”
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