By Libby George
LONDON (Reuters) – Crude oil prices reversed early losses on Friday, with Brent on track for its first weekly gain in a month, as strong U.S. gasoline demand and hopes of OPEC action outweighed concerns over fundamental oversupply.
Brent crude futures (LCOc1) were trading at $ 36.09 a barrel at 1100 GMT, up 80 cents from their last close and an intra-day low of $ 34.73. U.S. West Texas Intermediate (WTI) crude futures (CLc1) were up 75 cents at $ 33.82.
The gains, if they hold, would mark the third consecutive daily increase for Brent and the fifth for U.S. benchmark WTI.
Traders said that the rises were driven by short positions closed ahead of Brent’s expiry next week and by strong demand for gasoline in the United States.
But analysts said the over-supplied market, which many do not expect to balance until early next year, would pull prices back down in the near term.
“I don’t think it is fundamentally justified … I don’t think it will last,” Tamas Varga, oil analyst at PVM in London, said of the rise in prices.
Prices had also received a boost from Venezuelan Oil Minister Eulogio Del Pino saying late on Thursday that Qatar, Russia and Saudi Arabia had agreed to a meeting in mid-March as part of efforts to stabilise oil markets.
Strong gasoline demand in the United States was a big support. Data from the U.S. Energy Information Administration showed gasoline inventories falling last week for the first time since early November, suggesting that consumers could gobble up more of the world’s oil products than expected.
“The idea that gasoline demand is actually rising suggests that perhaps the lower prices of crude are actually prompting a greater usage of this product (gasoline),” said Vyanne Lai, oil analyst at National Australia Bank.
The data is a glimmer of hope for markets grappling with a glut exacerbated by crude production that is exceeding demand by 1 million to 2 million barrels per day (bpd), though Iran’s target of increasing its exports by 1 million bpd within the next year looms over the market.
In the longer term, however, analysts expect oil prices to rise again.
Investment bank Jefferies called current prices unsustainable and said that production declines across most of the important non-OPEC producers is likely to set the stage for an oil price recovery in the second half of this year.
(Additional reporting by Henning Gloystein and Manesha Pereira; Editing by David Goodman)
