Brent crude futures, the global benchmark, posted their strongest
daily gains in four months, trading up $1.55, or 5.4 percent, at
$30.10 a barrel by 1149 GMT. U.S. crude futures were up 66 cents at
$30.08 a barrel, reverting to a discount to Brent prices.
"It seems to be a healthy upside correction in an otherwise
downtrending market," said Tamas Varga, oil analyst at London
brokerage PVM Oil Associates.
Traders said prices drew support from strong oil demand in China.
Preliminary Reuters calculations based on government figures showed
record oil consumption of 10.32 million barrels per day (bpd), up
2.5 percent from 2014, defying slowing growth in the world's
But oil prices remained near 12-year lows as a global glut was set
to last until at least late 2016, according to the International
Energy Agency, which advises industrialized countries on energy
The agency said oil prices could fall below current levels.
"While the pace of stock building eases in the second half of the
year as supply from non-OPEC producers falls, unless something
changes, the oil market could drown in oversupply," the IEA said.
Global oil demand fell to a one-year low in the fourth quarter of
2015, the IEA added, due to mild weather.
"It's not looking good. There is no reason to believe why and how
prices will recover by the end of 2017," Abhishek Deshpande, oil
analyst at Natixis, told Reuters Global Oil Forum.
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The oversupply is set to worsen with the return of Iranian barrels
to the market following the lifting of nuclear-related Western
Iran said it could increase oil output by 500,000 bpd and issued an
order to start the ramp-up on Monday.
Most analysts expect Iran's full return to oil markets to be
relatively slow due to the need to overhaul its infrastructure
following years of under-investment, but the country is also
estimated to have stored 12-14 million barrels of crude and 24
million barrels of condensates for immediate sale.
China's CNOOC said it aimed to cut oil and gas production this year
and expected output to rebound in 2018.
(Additional reporting by Roslan Khasawneh and Henning Gloystein in
Singapore; Editing by Dale Hudson and David Evans)
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