Oil prices hit new 2016 highs despite lingering excess

Brent crude reached fresh 2016 highs on Friday and was poised for its biggest monthly gain in seven years as a weak dollar and falling U.S. production tempered concerns about a lingering excess of physical oil.

A looming rise in Middle East output capped gains, but investor sentiment held the optimism that has helped lift oil futures nearly 80 percent higher than January lows.

Brent crude futures rose 12 cents to $48.26 a barrel by 8:20 a.m. ET (1220 GMT). U.S. crude was up 46 cents at $46.49 a barrel, with both contracts hitting fresh 2016 highs.

Investment bank Jeffries on Friday said the market “is coming into better balance” and would flip into undersupply in the second half of the year.

“Global spare capacity is now 2 million barrels per day (bpd), or about 2 percent of global demand. This is a precariously low level,” it added.

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