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Oil prices surge past US$30 on eurozone stimulus pledge

[SINGAPORE] Oil prices surged past US$30 a barrel in Asia Friday after the European Central Bank (ECB) signalled further stimulus measures to help the struggling eurozone economy, but analysts expect oversupply woes to limit gains.

Remarks by ECB chief Mario Draghi that possible additional monetary stimulus measures could come as soon as March lifted global markets and brought a measure of joy after weeks of painful losses.

At around 0730 GMT, US benchmark West Texas Intermediate (WTI) for March delivery was up $1.31, or 4.44 per cent, at US$30.84 a barrel. Brent rose $1.52, or 5.2 per cent, to $30.77.

On Thursday, Brent piled on almost five per cent and WTI jumped more than four per cent after Draghi said there were "no limits to how far we are willing to deploy our policy instruments" in a signal that more stimulus could be coming.

The black gold was also given a boost by a report showing US stockpiles did not rise last week as much as expected.

Earlier in the week, WTI sank to as low as US$26.19 and Brent tumbled below US$28 - both at more than 12-year lows.

Crude prices have been hammered the past three weeks, falling about 75 per cent in 18 months on a supply glut, weak demand, overproduction and a slowing global economy.

Adding to downside pressure is the return of Iranian crude into the market after the lifting of Western sanctions, offsetting any output cuts from other countries.

Analysts said however it was still unclear if the ECB-fuelled rebound will hold.

Bernard Aw, market strategist at IG Markets in Singapore, said: "If market participants piled into oil because of ECB stimulus hopes, then the upmove will not be sustainable given that the supply glut will re-exert itself sooner rather than later." He cautioned against expectations that oil prices have already hit bottom.

"It's the end of the week, and for the past three weeks, the markets have wrong-footed analysts who say that we are going to see a rebound," Aw added.

The National Iranian Oil Company has said it had ordered an increase in output of 500,000 barrels per day after the sanctions were removed Sunday.

BMI Research said the weakness in commodity prices since the start of the year "reinforces our view that 2016 will be another tough year for commodity markets and that a sustained recovery will remain elusive".