Brent oil edges up, set for third straight weekly gain

[LONDON] Brent crude edged up on Friday, poised to mark a third consecutive week of price increases as air strikes in Yemen stoked concerns over the security of Middle East oil shipments.

A softer US dollar and strong economic indicators in Europe and Asia also lent support to oil prices despite Opec crude production that is outstripping demand by nearly 2 million barrels per day.

Brent for June delivery pared early gains, but was trading 15 cents higher at US$65 a barrel by 1357 GMT. The benchmark touched its highest since Dec. 10 at US$65.80 earlier in the day, and settled up US$2.12 on Thursday.

US crude for June delivery fell 90 cents to US$56.84 a barrel, after settling up US$1.58. The front-month contract hit a 2015 high of US$58.41 on Thursday and is on course for its sixth straight weekly gain.

"It's been a pretty strong rally, so we're seeing a correction at the moment," said Olivier Jakob of PetroMatrix.

The rise in futures over the last month shows a growing disconnect between oil producers and Wall Street over when slumping oil prices will recover, with the financial community betting that the oil price cycle may turn more quickly than the industry expects.

Meanwhile, many analysts say the market balance does not support the recent price gains. Some oil majors are considering further spending cuts to deal with an extended period of low prices.

"The hard facts are rather speaking for low prices," said Eugen Weinberg of Commerzbank, pointing to high inventories in the United States and strong production from Opec nations.

Additionally, some warned that the recent price gains could encourage more US shale oil production.

"Should prices continue on their recent uptrend, there is a strong possibility that the drilled but uncompleted wells (could) come back," Energy Aspects oil analyst Virendra Chauhan told the Reuters Global Oil Forum.

Thursday's spike in prices came as warplanes from a Saudi-led coalition pounded Houthi militiamen and military bases with at least 20 air strikes throughout Yemen, despite Riyadh saying earlier it was winding down its campaign.

On Friday, Societe Generale raised its 2015 average price forecast for Brent by US$4.33 to US$59.54 a barrel and for US crude by US$4.28 to US$53.62 a barrel.

REUTERS