[NEW YORK] Oil prices jumped more than 2 per cent on Friday and were poised for a third week of gains as market sentiment turned more upbeat amid signs a persisting global supply glut may be easing.
Strong gasoline consumption in the United States, increasing signs of declining production around the world and oilfield outages have underpinned a return to investment in the sector, traders said.
"The current rally is driven by a market sentiment that is becoming more and more convinced that the worst is over and the global oil market rebalancing process is already in play," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Brent crude futures jumped 2.1 per cent to US$45.45 per barrel as of 10:44 am ET (1431 GMT). US West Texas Intermediate crude was up 2 per cent at US$44.07 a barrel.
Brent has surged about 6 per cent so far this week and WTI 9.7 per cent as both benchmarks headed for a third week of gains. Crude is up more than two-thirds since its 2016 lows between January and February.
Traders also pointed to strong crude imports to China in March as providing support to prices.
Still, some analysts warned that the oil market was still far from balancing supply and demand.
"While this recent rally has the potential to run further to the upside ... we believe that it is not yet driven by a sustainable shift in fundamentals," Goldman Sachs said in a note to clients.
The Wall Street bank maintained its view that a sustainable balancing of the market, driven by declines in US shale oil production, would take place in the third quarter of 2016.
Another supportive factor has been producers taking advantage of higher prices by locking in output.
French investment bank Natixis said they expect producers in the US to take every opportunity to aggressively hedge as soon as oil prices recover for short periods of time.
Falling output, especially in the United States, where many producers have reeled from an up to 70 per cent oil price rout since 2014, has also helped to lift the market.
Natixis said it expected US 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.