[LONDON] Crude oil prices rose on Monday as investors shrugged off a US refinery strike and focused on a falling US rig count that signalled lower production down the line.
"There were a lot of people on the sidelines waiting for an opportunity to buy," said Bjarne Schieldrop, chief commodity analyst at SEB.
"Brent has struggled sideways for a long time but it closed above the 20-day moving average on Friday for the first time since July, and the rig count is falling sharply. So now they think, maybe this is the time to buy."
At 1438 GMT, Brent crude futures were up 50 cents at US$53.50 a barrel, after leaping as high as US$55.62 and dipping as low as US$51.41, as the bulls battled with the bears.
US crude was up 55 cents at US$48.79 a barrel, after touching an intraday high of US$50.56 and slumping to US$46.67.
Brent crude speculators raised their net long positions by 1,056 contracts to 143,039 in the week to Jan 27, ICE said on Monday, as some investors took the view that the oil price was beginning to bottom out.
Both contracts rallied about 8 per cent on Friday, fuelled by month-end short-covering and a record weekly drop in the number of US oil rigs employed, according to industry data from Baker Hughes. The count is down 24 per cent from its October peak.
"Most market observers have been surprised by the scale of the decrease, and expectations of US oil output this year will no doubt be lowered accordingly," analysts at Commerzbank said in a note. "The foundation for a steady price recovery in the second half of the year has thus been laid."
However, in the short term the price increase has been exaggerated as there is still considerable oversupply, they said.
In the United States, union workers were on strike for a second day on Monday at nine refineries and chemical plants as they sought a new national contract with oil companies covering labourers at 63 plants.
This boosted refined oil products prices in the United States and Europe, as traders anticipated more arbitrage opportunities opening up to the west.
"Values are following through to the upside this morning as US product markets gather additional bullish momentum off of labour strikes at several US refiners," Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note. "While this news is theoretically bearish to the crude market, WTI is still getting pulled higher."