Crude prices closed up more than 4 percent on Thursday as rising violence in producer Libya and an expected boost in oil demand from China’s central bank easing helped the market rebound from a sharp rout in the previous session.
Traders and analysts said they expect crude’s rollercoaster ride which began last Friday to continue as it tries to find a bottom to a seven-month selloff that took prices near six-year lows.
But many were pessimistic about a sustained rally, as record-high U.S. inventories rekindle worries about a glut.
“It is just a changing market sentiment as more and more players are starting to believe production cuts are coming in the U.S. and that will be enough to erase the surplus,” Dominick Chirichella, senior partner at the Energy Management Institute, New York, said on the Reuters Global Oil Forum.
“I think there will be a lot of disappointment going forward for that view.”
In the physical crude market, top exporter Saudi Arabia cut March prices for its Asian customers while raising rates for European and U.S. buyers, sending mixed signals to futures traders.
Benchmark Brent crude futures settled up $2.41, or 4.5 percent, at $57.57 a barrel. U.S. crude futures, also known as West Texas Intermediate (WTI), finished up $2.03, or 4.2 percent, at $50.48.
Brent fell nearly 7 percent and WTI 9 percent on Wednesday after the U.S. government said crude stocks rose 6.3 million barrels last week to record highs above 413 million. The stockpile jump cut short a four-day rally that had sent crude prices up nearly 20 percent after a slump in the number of U.S. oil drilling rigs.
In Thursday’s session, crude futures rose early, reacting to a raid on an oilfield in Libya by gunmen even though production was not affected. An attack on a tanker off Nigeria and monetary easing by China that could boost oil demand also provided support.
The rally accelerated towards noon, after oil services firm Genscape reported a 550,000 barrel build in crude stockpiles at the Cushing, Oklahoma, delivery point for WTI in the four days since Jan. 30. Traders had expected above 1 million barrels.
The smaller-than-expected Cushing build sharply narrowed the discount in WTI’s front month to the second month CLc1-CLc2. Brent premium’s to WTI CL-LCO1=R widened to $6.09 a barrel at the settlement, its biggest since late September.
Reuters