Oil prices rallied above $30 a barrel on Friday as investors hunted for bargains after a volatile week and bet that fresh stimulus measures by major central banks would improve sentiment for the beleaguered commodity.
Brent crude LCOH6, +6.87% the global oil benchmark, rose 5% to $30.68 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLH6, +5.72% were trading up 4.1% at $30.74 a barrel. Earlier in the session, Brent rose as high as $31.10 a barrel while WTI touched $31.04 a barrel.
European Central Bank President Mario Draghi hinted Thursday at more easing measures amid renewed pressure on inflation in European economies from falling oil prices. Traders were also speculating that Japan’s central bank might increase its asset-purchasing program at its end-of-January meeting.
“Investors welcomed the ECB’s hints of further monetary stimulus to come as soon as March,” analysts at JBC Energy said in a note to clients.
Read: 4 key takeaways from Draghi’s ‘no limits’ statement
Global bourses also bounced on the stimulus talk. The Stoxx Europe 600 was up 2% in early trade, building on gains of nearly 2% in the previous session. Japan’s Nikkei Stock Average closed 5.9% higher after steep losses earlier in the week, while Chinese stocks also rose.
The gains in crude came despite another increase in U.S. oil stockpiles that underscored the persisting glut of crude around the world.
The U.S. Energy Information Administration reported that domestic stockpiles rose by around 4 million barrels last week. U.S. oil production also rose last week, to above 9.2 million barrels a day, the EIA said, despite prices having retreated by around a fifth since the beginning of the year.
Against that bearish backdrop, oil’s Friday rally puzzled some market watchers.
“Sometimes the oil market works in mysterious ways,” said Michael Poulsen, an oil analyst at Global Risk management. “The fundamental short-term oversupply situation has not changed, though.”
Read: Here’s how you’ll know oil prices have hit bottom
The pessimism about oil prices, which once surpassed $145 a barrel in 2008, is mainly driven by the high-paced production of major suppliers like Saudi Arabia and Russia, which are unwilling to curb output. Iran’s imminent return to the oil-export market is also expected to deepen the global glut by adding roughly 500,000 barrels a day. The deceleration in China’s economy is also dimming the outlook on oil demand.
Crumbling prices over the past 19 months have eroded the national coffers of several oil producers like Venezuela and Nigeria, which have been urging the Organization of the Petroleum Exporting Countries to take some price-supportive measures.
The request has largely been ignored by the cartel, led by Saudi Arabia, which has repeatedly said a cut in production would only be considered if non-OPEC producers are also willing to trim their output.
“Prices will for sure drop lower unless this impasse is resolved but the likelihood of that happening soon is slim because most producers would rather sell at a steep discount than lose their existing customers,” said Gao Jian, a Shandong-based commodity analyst at SCI International.
“At the pace, it is hard to see a bottom,” he added.
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Nymex reformulated gasoline blendstock RBG6, +4.65% —the benchmark gasoline contract—rose 4.3% to $1.08 a gallon. ICE gasoil changed hands at $274 a metric ton, up $15 from the previous settlement.
