Onset of a massive snowstorm on the U.S. East Coast sent U.S. heating oil up more than 10 percent
SINGAPORE: Brent crude futures edged up on Monday after already making up ground last week as indications mounted of the market bottoming out, but analysts warned that downward risk remained and that it would take some time to work down a huge global glut.
Brent futures were trading at $35.24 per barrel at 0807 GMT, up 14 cents from their previous close. Since Feb. 11, the last time Brent was below $30, the crude benchmark has risen some 17 percent.
U.S. crude futures were weaker, weighed down by record American crude inventories, dipping 7 cents to $32.70 a barrel, after gaining around 27 percent since Feb. 11.
"There is still a lot of downside risk ... But the U.S. crude market seems to have passed the worst point and crude runs should start creeping higher, taking pressure off inventory levels," said Richard Gorry, director of JBC Energy Asia.
"The latest data on U.S. production is also supportive as it indicates that the low prices are finally having an impact," he said.
U.S. producers cut the number of rigs drilling for oil for a 10th straight week to the lowest since December 2009, data showed on Friday, which analysts expect will lead to an output fall of 600,000 barrels per day (bpd) this year.
"The total oil rig count is now falling below that required to sustain oil production and as a result production levels are beginning to fall," brokerage Banchero Costa said, adding that U.S. 2016 oil production would fall 5 percent from the previous year to 8.7 million bpd.
Morgan Stanley said a potential Russian-Saudi agreement to freeze output at January levels could also drive prices.
"Russia said production freeze agreement discussions should end on March 1 ... Any news of progression could drive headlines and prices."
The bank added, though, that this would do little to rein in a global production overhang, which is estimated at between 1 million to 2 million bpd and is accompanied with a "deceleration in demand growth".
Trading data, however, suggested shifting sentiment. The amount of open positions in U.S. crude contracts that bet on a further fall in prices has fallen over 17 percent since mid-February to their lowest level in 2016.
At the same time, financial traders have sharply raised their bullish bets on oil after talk of a global production freeze and signs of falling U.S. shale crude output, as well as growing gasoline demand.
"There are tentative signs the worst may be over for commodities, at least judging by the pick-up in investor sentiment," Barclays said. - Reuters
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