[LONDON] Brent crude oil hit its highest level since early January on Friday and was on track for its first weekly gain in a month as strong US gasoline demand and supply disruptions outweighed concerns about a fundamental glut.
Brent crude futures were trading at $36.63 a barrel at 1348 GMT, up $1.34 from their last close, but rose to $36.84 earlier in the session, the highest since Jan 5. US West Texas Intermediate (WTI) crude futures were up $1.05 cents at $34.12.
The gains would mark the third consecutive daily increase for Brent and the fifth for US benchmark WTI.
Strong gasoline demand in the United States, and an upward revision to the country's economic growth for the fourth quarter, helped boost expectations of oil consumption.
But supply disruptions in Iraq and Nigeria that have taken more than 800,000 barrels per day (bpd) of oil off the market were also underpinning prices. "There are two elements of strength. One is gasoline...and the second is supply disruptions," said Olivier Jakob, managing director of PetroMatrix.
He noted that the loss of Iraqi Kurdish oil exports due to security issues on the main pipeline carry the crude, as well as a force majeure on Nigeria's Forcados oil, balanced the recent increases to supply from OPEC nations. "That's quite a lot (of oil) and it's more than offsetting the increases from Iran," Jakob said.
Most analysts said the oversupplied market would not begin to draw down stocks until early next year, but the disruptions and demand helped give a near-term boost to markets that are grappling with crude production that is exceeding demand by 1 million to 2 million barrels per day (bpd).
Data from the US Energy Information Administration showed gasoline inventories falling last week for the first time since early November, suggesting that consumers could gobble up more of the world's oil products than expected. "The idea that gasoline demand is actually rising suggests that perhaps the lower prices of crude are actually prompting a greater usage of this product (gasoline)," said Vyanne Lai, oil analyst at National Australia Bank.
In the longer term, however, analysts expect oil prices to rise again.
Investment bank Jefferies called current prices unsustainable and said production declines across most of the important non-Opec producers is likely to set the stage for an oil price recovery in the second half of this year.