Amid a confluence of ongoing factors, Brent crude will likely to extend gains ahead of a major oil producers meeting in Doha next week.
On Friday, Brent crude jumped more than 6 per cent to near $42 per barrel as US output slid for the 10th week out of the previous 11.
“Traders are clearly chasing the market and the collapsing contango has added extra support. Global markets remain oversold which still raises the question of this being too much too soon,” Ole Hansen, head of commodity strategy with Saxo Bank said by an email.
Oil prices tumbled to their lowest level in more than 12 and a half years in January, but recovered later on signs on the easing of a global supply glut.
But volatility is far from over as the traders eye the Doha meeting scheduled on April 17 when Opec members will meet non-Opec to discuss as possible production freeze.
“The coming week in oil prices is expected to be dominated by high levels of volatility, as the market moves into a season of high gasoline demand and speculation of a Doha accord,” said Vaqar Zuberi Portfolio Manager & Senior Analyst within Mirabaud Asset Management.
Saudi Arabia, the world’s biggest crude oil exporter, has said there cannot be a deal without the participation of Iran, which is aiming to boost market share post the removal of sanctions. Another Opec member Kuwait, however, has said a deal can be reached without Iran.
“We are not expecting too much from this Doha meeting as oil producers are still very much focused who can undercut the other. Hence, the chances may be very slim that a production freeze will be the outcome,” Naeem Aslam, chief market analyst with AVA Trade.
Meanwhile, money managers slashed their bullish exposure in US crude by the most in three months. Hedge funds managers and other investment firms that speculate on oil cut their net longs in US crude options and futures by 21,831 contracts to 177,504 for the week ended Tuesday.