Oil hit its highest level for the year on Friday with Brent crude rising above $60 a barrel, as euro zone economic growth exceeded expectations and market bulls priced in another drop in the US oil rig count. The rise in prices was also fuelled by bets that cuts in energy firms' exploration budgets will help mop up some of the excess oil in the world market.
Many analysts and traders believe there is a global oversupply of nearly two million barrels per day in crude oil. They say little has changed fundamentally to explain the rally of the past two weeks. Brent rose about 3 percent in Friday's session and was on track to a 6 percent on the week and 15 percent on the month. Gains heightened after its front-month contract switched on Thursday at a premium.
Brent had collapsed from a high above $115 a barrel in June to a near six-year low under $46 in late January, as fears of a global oil glut rattled the market. "Naturally, when prices fall that much within that short a time, you're likely to have a severe rebound as well, though speculators are possibly adding more fuel on the way up now," said Phil Flynn, analyst at the Price Futures Group in Chicago.
Brent was up $1.85 at $61.11 a barrel at 1:30 p.m. ET (1830 GMT), having reached $61.77 earlier. US crude rose $1.52 to $52.73, after a session high at $53.32. Some traders attributed Friday's strength in oil to an unexpected acceleration in euro zone economic growth in the final quarter of 2014. The bloc's largest member, Germany, particularly grew at more than twice the expected rate.
Separately, the number of rigs drilling for oil in the United States fell by 84 this week to 1,056, the lowest since August 2011, a survey by oil services firm Baker Hughes showed on Friday. Still, the recent rally in oil prices has come amid record-high US crude inventories.
Walter Zimmerman, chief technical analyst at United-ICAP in Jersey City, New Jersey, said unless US crude rose above $58.72, its rebound from a low in January of $43.58 "is doomed to be a minor bear market correction in a continuing long-term down trend."
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