Oil surged above $30 on Friday after the European Central Bank (ECB) signalled more stimulus, and after key crude producer Saudi Arabia labelled current ultra-low price levels as “irrational”.
However, analysts expect the stubborn global oil supply glut – which sparked this week’s 12-year lows – to limit gains heading into the weekend.
In London midday deals, Brent North Sea crude for delivery in March rebounded $1.61 to $30.86 per barrel compared with the close on Thursday.
US benchmark West Texas Intermediate (WTI) for March rallied $1.41 to $30.94 a barrel.
Global equities and crude oil prices began rebounding Thursday after the European Central Bank said there were “no limits” to the stimulus measures it might take to boost the eurozone economy.
ECB boss Mario Draghi highlighted concerns about the impact of plunging equity and oil prices on already weak inflation and pledged the bank would reconsider its monetary policy at its March policy meeting.
In response, Brent piled on almost 5% and WTI jumped more than 4% on Thursday.
Oil prices also rebounded as a key report showed US inventories rose by less than expected last week.
Crude futures turned higher also as Organisation of the Petroleum Exporting Countries (OPEC) kingpin Saudi Arabia declared this week’s oil price levels as “irrational”.
“The price itself is irrational,” Khalid al-Falih, chairperson of state-owned oil firm Saudi Aramco, said at the World Economic Forum in the Swiss ski resort Davos.
“I do feel that the market has overshot on the low side and that it is inevitable (that it will) start turning up,” he said.
“Where will we be by year-end? I don’t know but certainly I would bet that it is going to be higher than where we are today.”
In both June and December last year, the Organisation of the Petroleum Exporting Countries – which pumps about 40% of the world’s oil – refused to slash output.
The Saudi-backed policy is aimed at pushing oil prices lower to squeeze less-competitive players, including US shale producers, out of the market.
The two main oil contracts remain close to 12-year lows owing to a supply glut and weak demand.
The commodity had crashed on Wednesday, with Brent striking $27.10 – last seen in early November 2003.
And WTI struck $26.19 – a level witnessed in May of the same year.
Crude prices have been hammered the past three weeks, and have collapsed by about 75% over the last 18 months on a supply glut, weak demand, overproduction and a slowing global economy.
Adding to downside pressure is the return of Iranian crude into the market after the lifting of Western sanctions, offsetting any output cuts from other countries.
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Credit: Fin24