Brent crude rallies above US$42, its highest this year, on production and demand outlook

LONDON — Oil rose above US$42 a barrel on Friday, hitting its highest this year and extending a rally right into a fourth week on expectations of the production freeze by major exporters, stronger seasonal demand and dollar weakness.

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Brent crude’s front-month contract was up 59 cents at US$42.13 a barrel by 1113 GMT, having touched a 2016 high of US$42.31.

U.S. crude gained 64 cents to US$40.84 a barrel after rising as high as $40.93. The benchmark had jumped by 4.5 percent to close the prior session at US$40.20.

Oil prices have surged by more than 50 per cent from 12-year lows reached in December, bolstered as the Organization from the Petroleum Exporting Countries (OPEC) floated the thought of a production freeze, boosting Brent from about US$27 and U.S. crude from around $26.

Many analysts think there’s still steam in the rally.

“We’re leaving the period of low demand and beginning to move toward the time when demand increases within the summer,” said Olivier Jakob, oil market analyst at Petromatrix at Zug in Switzerland.

He added that the massive oil glut that had helped to hammer prices last year at last appears to be stabilizing.

“We’re moving towards taking a look at a classic surplus, rather than a new one being built up,” he explained, adding that it’s likely that Brent will stabilize round the mid-US$40s.

Crude inventories in the United States increased by 1.3 million barrels in the week to March 11, to a record high of 523.2 million barrels, though that was a much smaller build compared to 3.4 million barrels expected by analysts, the Energy Information Administration said on Wednesday.

Analysts said that dollar weakness seemed to be lifting oil.

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The dollar index is down 3.2 per cent to date this month. A weaker dollar makes oil, which is priced in the U.S. currency, less expensive to holders of other currencies.

U.S. oil is at risk of a fifth week of gains, while Brent is on target for a fourth weekly increase, a long rising streak in about a year for both benchmarks. Oil is already up 17 percent in March, its strongest monthly gain since last April.

OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will come across on April 17 within the Qatar capital Doha in order to agree the very first global supply deal in 15 years.

? Thomson Reuters 2016