Oil prices rose in Asian trade on Friday, setting crude futures on course for solid weekly gains, as market sentiment becomes more upbeat despite ongoing oversupply.
International benchmark Brent crude futures LCOc1 were trading at $44.98 per barrel at 0418 GMT, up 45 cents or 1 percent from their last settlement.
U.S. West Texas Intermediate (WTI) crude was up 50 cents or 1.2 percent at $43.68 a barrel.
Brent has risen about 4.5 percent so far this week and WTI 8 percent, putting the contracts on track for a solid price rally. Crude is up by more than two-thirds since its 2016 lows between January and February.
Traders said that sentiment in the entire commodity complex had turned more confident, with new cash being put into the market by investors, lifting prices.
Another factor has been producers taking advantage of higher prices by locking in production.
“We would expect producers in the U.S. taking every opportunity to aggressively hedge as soon as there is opportunity when oil prices recover for short periods of time,” French investment bank Natixis said.
Falling output, especially in the United States, where many producers are shutting down following an up to 70 percent 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) this year, compared with 2015, and by another 500,000 bpd in 2017.
Despite the recent rally, oil markets remain oversupplied as between 1 and 2 million barrels of crude are being pumped out of the ground every day in excess of demand, leaving storage tanks around the world filled to the brim with unsold fuel.
“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.
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