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 Recent gains have given analysts reason to become more bullish on
oil price forecasts, with those polled by Reuters raising their
price expectations for the second month in a row after a two-year
price rout.
A looming rise in Middle East output capped gains, but investor
sentiment held the optimism that has helped lift oil futures nearly
80 percent higher than January lows.
Brent futures were trading at $48.26 a barrel at 1211 GMT
(7:11 a.m. ET), up 12 cents from their last close. U.S. crude was up
42 cents at $46.45 a barrel, with both contracts hitting 2016 highs
earlier in the session.
Investment bank Jefferies on Friday said the market "is coming into
better balance" and would flip into undersupply in the second half
of the year.
But others warned that the rally was happening too soon, and driven
in large part by investors taking speculative positions in oil.
"The issue is that we haven't seen price rallies ... correlate with
fundamentals," said Hamza Khan, senior commodity strategist at ING.
"The fundamentals - high stocks, high production - haven't changed."
Deutsche Bank said a looming rise in production by the Organization
of the Petroleum Exporting Countries - due to climbing Iranian
output and following outages in Iraq, Nigeria and the United Arab
Emirates - could cap recent price rises.
Additionally, Saudi output is expected to edge up by 350,000 barrels
to around 10.5 million barrels per day, sources told Reuters, just
as tankers filled with unsold oil are at sea seeking buyers.
Still, falling production outside OPEC, notably in the United
States, has raised hopes that the worst of the nearly two-year
excess of oil was over.
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Analysts polled by Reuters raised their average forecast for Brent
crude futures in 2016 to $42.30 a barrel, compared with $40.90 last
month.
Bank of America Merrill Lynch said in a note that "non-OPEC oil
supply is indeed hanging off a cliff", and estimated that global
output would contract year on year in April or May for the first
time since 2013.
A weakening dollar, which has fallen 6 percent this year against a
basket of other leading currencies, helped support oil, as it makes
dollar-priced crude cheaper for holders of other currencies.
There are also growing risks that production in OPEC member
Venezuela could decline. Risk consultancy Eurasia Group said the
state was running out of cash to keep its oil pumps running.
"Mounting problems will probably lead to a decline of
100,000–150,000 bpd this year," Eurasia Group said.
(Additional reporting by Henning Gloystein in Singapore; Editing by
Dale Hudson and Elaine Hardcastle)
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