Oil extended a rally above the $60 per barrel in London amid speculations that a drop in US drilling would slow crude output and curb the global supply glut.
Brent futures climbed 3.8%, capping the third weekly gain. Oil is recovering from the lowest prices in around six years as US drillers lowered the number of rigs in service to the least since Aug 2011.
Bloomberg quoted Dan Flynn, trader at Price Futures Group as having said, “The market overreacted to the downside and now is pricing in supply risk. The market is seeking its new trading level.”
April settlement Brent climbed $2.24 to close the session at $61.52 per barrel on the London ICE Futures Europe exchange. It was the highest close for the front-month futures since December 23. The volume of all futures traded as 42% above the 100-day average. The March contract expired on Thursday after gaining $2.39 to $57.05.
West Texas Intermediate oil for March delivery gained $1.57 or 3.1% settling at $52.78 per barrel on the New York Mercantile Exchange. The volume was up 47% from the 100-day average. The April WTI contract closed at $53.67, a discount of $7.85 to April Brent.
Tom Pugh, commodities economist at Capital Economics was quoted by Market Watch as having said, “The recent bounce back in the price of Brent appears to have been driven by the sharp drop in the number of rigs drilling for oil and the slew of announcements from major oil companies that they are cutting back on investment.”
On Nymex, March gasoline climbed 1.96% or $1.626 per gallon ending the week with a gain of 4.3% while March heating oil closed at $1.971 per gallon, gaining 3% for the session and over 7% for the week.
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