Oil prices blasted off on Friday, as news came out about a proposed freeze in oil production. This coupled with firm economic indicators from the United States and Germany which showed positive signs for growth in fuel demand. All this excitement sent the bulls running and they never looked back.Analysts focused on the belief that Russia's oil production could fall in April. The country's energy minister expressed hopes that producer nations could agree to an output freeze at a meeting in Doha later this month.
West Texas Intermediate crude futures traded $2.44 higher at $39.69 per barrel by mid morning, more than 6.5 percent above their last close. Analysts were quick to give their two cents, citing the declining supply in the United States along with a declining rig count. Mix this with all the global news and you get a recipe for strength.
The declining supply was attributed to numbers released by the Energy Information Administration. Data showed stockpiles at the Cushing, Oklahoma hub dropped by more than 480,000 barrels due to the shutdown of the Keystone pipeline. Summer maintenance in the North Sea fields that form the basis of the Brent benchmark also helped boost near-term prices.
Bank of America Merrill Lynch said in a note that U.S. shale production was in "freefall" and that "as the global oil glut starts to clear, crude oil should lead the way".
A rebound in financial markets also boosted optimism over demand. The U.S. Federal Reserve said the country was on the path of more economic growth, while rating agency Moody's said Germany, Europe's biggest economy, should see a slight acceleration in growth to 1.8 percent.
Not everyone was a bull today though. Some analysts warned that oil prices could fall again, dragged down by a glut that will take time to clear and soaring production outside the United States.
"We believe the current oil price is unsustainable and expect a fundamental price recovery when markets move into better balance in mid- to late-2H16," investment bank Jefferies said, adding that "the recovery could be protracted".
Lastly, Iraq said on Thursday that exports from its southern ports had hit almost 3.5 million barrels per day by April, up from an average of 3.29 million barrels per day in March, while Iran said it would participate in a production freeze only once it had regained its pre-sanctions level of 4 million barrels per day.
Its too early to tell if the bulls have run ahead of themselves, but it is clear that these low oil prices have traders eager to pick a bottom for the eventual bounce.