Oil prices rose on Friday, setting crude futures on course for solid weekly gains, as market sentiment turned more upbeat in spite of ongoing oversupply.
International benchmark Brent crude futures traded at 44.88 dollars per barrel at 0713 GMT, up 35 cents, or 0.8 per cent, from their last settlement.
U.S. West Texas Intermediate (WTI) crude was up 51 cents, or 1.2 per cent, at 43.69 dollars a barrel.
Brent has risen about 4.5 per cent so far this week and WTI eight per cent, putting the contracts on track for a solid price rally.
Traders said that sentiment in the entire commodity complex had turned more confident in spite of on-going oversupply, with new cash being put into the market by investors.
“This recent rally has the potential to run further to the upside.
“We believe that it is not yet driven by a sustainable shift in fundamentals,” Goldman Sachs analysts said in a note to clients on Friday.
Goldman said it did not anticipate a sustainable shift in oil fundamentals till the third quarter.
However, it added that it changed its view on energy to “neutral” from “underweight”, citing the reduced likelihood of extreme downside.
Another price driving factor has been producers taking advantage of higher prices by locking in production.
“We expect producers in U.S. taking every opportunity to hedge as soon as there is opportunity when oil prices recover for short time periods ,” French investment bank Natixis said.
Falling output, especially in the U.S., where many producers are shutting down following an up to 70 per cent price rout since 2014, is also helping to lift the market.
Natixis said it expected U.S. oil production to drop by at least 500,000 to 600,000 barrels per day (bpd) within the year, compared with 2015, and by another 500,000 bpd in 2017.
“The energy complex remains volatile ahead of the 1Q16 reporting period which will likely be worse than what we thought was already an ugly 4Q15,” U.S. investment bank Jefferies said.
