 "Oil rises 5% to above $30 as cold weather pushes demand")
Oil prices rose 5% on Friday to scale the $30 mark breached last week, as cold US and European weather as well as firmer financial markets gave traders reason to cash in on record short positions.
While crude futures on both sides of the Atlantic were poised for their first weekly gain this year, analysts cautioned that the bounce in prices could be driven by sentiment given soaring inventories amid persistent overproduction.
"This could be the bottom, but people still feel that inventories will continue to rise as global crude supply continues to outpace demand," said Tony Nunan, oil risk manager at Mitsubishi Corp in Japan.
"Fundamentally, oil prices are already too low if you look at the medium to long term," said Nunan, "but how far will sentiment continue to drive prices is difficult to say."
In its monthly report on Tuesday, the IEA said the world oil market would remain oversupplied for at least another year.
"A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels — should international sanctions be eased — are likely to keep the market oversupplied through 2016," said the Paris-based agency.
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Brent was up $1.50 at $30.75 per barrel, off its low of $27.10 and is headed for a more than 6 % weekly gain.
US crude was up $1.26 at $30.79 per barrel at 0732 GMT, more than $4 away from a 12-year low of $26.19 and is set for a weekly rise above 4 %.
The oil price gains helped soothe skittish markets, with MSCI's broadest index of Asia-Pacific shares outside Japan climbing 2.67 %, coming off four-year lows hit in the previous session.
Oil prices drew support from freezing weather conditions and snowstorms that have gripped the US East Coast and parts of continental Europe, lifting demand for heating oil.
The cold weather in North America and Europe follows an extremely mild start to winter in large parts of the northern hemisphere, which had led to weaker-than-usual demand for oil and exacerbated a plunge in prices.
Traders said that a lot of people with open short positions in the market, which profit from falling prices, had decided to cash in when prices plunged 30 % between the beginning of the year and the middle of this week. They have now flipped into buying at low costs, lifting oil futures.
"More stable global markets are likely to see speculative buying re-emerge in commodities that have suffered heavy losses in recent weeks. However, these rallies are likely to remain short-lived," ANZ Bank said.