United States oil bounces, closing up 2.9 pct on March meeting report

“The idea that gasoline demand is actually rising suggests that perhaps the lower prices of crude are actually prompting a greater usage of this product (gasoline)”, said Vyanne Lai, oil analyst at National Australia Bank. The session high of $37 was its highest since January 5.

“Capping production at January levels, when the market was pumping out well over a million barrels of crude a day above what consumers need, will in no way reduce overcapacity”.

Futures had fallen as much as 3 percent, as data indicating new record highs in USA crude inventories added to worries about oversupply in a slowing global economy. U.S. West Texas Intermediate (WTI) crude futures were up 75 cents at $33.82.

Figures yesterday from the American Petroleum Institute showed a 7.1mln rise in crude inventories last week, which was just more than double analyst predictions.

A boost for oil prices after Saudi Arabia, Russia, Venezuela and Qatar last week proposed to keep their output unchanged from January, provided other major OPEC and non-OPEC producers joined them, has since faded.

It comes after conjecture among oil market commentators over the substance behind the recent, and briefly lived, rally in crude prices.

In the longer term, however, analysts expect oil prices to rise again.

Hans Van Cleef, senior energy economist in Amsterdam for ABN Amro, said Brent’s break above the $36.25 technical resistance indicated “more short covering in the coming days”.

On Friday, data from Baker Hughes (BHI) showed that the number of active USA oil-drilling rigs (http://www.marketwatch.com/story/oil-prices-continue-higher-as-baker-hughes-reports-a-tenth-weekly-fall-in-us-oil-rig-count-2016-02-26) fell for a 10th week in a row-to their lowest in more than six years.

Jeffrey Grossman, dealer at New York’s BRG Brokerage, said he expected USA crude to trade at over $40 by end of March.

Investment bank Jefferies called current prices unsustainable, saying output declines among key non-OPEC producers will likely spark a recovery by second half 2016.