Crude futures rose in early trading on Monday after gaining over 15 per cent last week, with some indicators pointing to the possibility the market could be bottoming out.
International Brent futures had climbed around half a dollar, or 1.35 per cent, from their last close to $35.57 per barrel at 0338 GMT on Monday.
US West Texas Intermediate (WTI) crude futures were up 14 cents at $32.92 a barrel after gaining over 15 per cent the previous week.
Analysts said that first signs of a strengthening market outlook were appearing after a 20-month rout that has seen prices fall by 70 per cent.
“The US crude market also seems to have passed the worst point and crude runs should start creeping higher taking pressure off inventory levels,’’ said Richard Gorry, director of JBC Energy Asia.
“The latest EIA data on US production is also supportive as it indicates that the low prices are finally having an impact,’’ he said, referring to numbers from the US Energy Information Administration.
But Gorry added that there was also “still a lot of downside risk”’ due to the huge overhang in production and stored supplies.
‘"The Russian/Saudi production freeze talks continue to support the market, while in the US, shale producers continue to pull rigs from the ground in an effort to reduce spending. Baker Hughes data suggest US oil rig counts fell by 13 to 400,”’ ANZ bank said.
Market data also suggests early signs of shifting sentiment.
The amount of open positions in WTI crude contracts that bet on a further fall in prices has fallen over 17 per cent since mid-February to their lowest level in 2016, although by historic levels their amount remains high.
At the same time, financial speculators have sharply raised their bullish bets on oil after talk of a global production freeze and signs of falling US shale crude output and growing gasoline demand.
Money managers raised their combined net long position in crude futures and options in New York and London by nearly 16 per cent for the week ended February 23, data by the U.S. Commodity Futures Trading Commission (CFTC) showed.
“Technical signals support a reversal of a long-term downtrend as well,’’ said Wang Tao, Reuters technical market analyst, adding that WTI had found key support between $27.07-$28.97 per barrel.
“A second hammer seems to be forming on the monthly candlestick chart, in addition to the first hammer of last month. These two hammers strongly suggest a completion of a five-wave cycle from the August 2013 high of $112.24. The downtrend from this high could be reversing,’’ he said.