Oil Rallies As Bullish Signals Promise Second Weekly Gain

Oil
An Esso gas pump displays the price of fuel at 91.9 cents CAD ($0.72) per litre in Richmond Hill, Ontario, January 30, 2015. Canada's No. 2 integrated oil producer and refiner Imperial Oil Ltd said on Wednesday it is considering selling 475 company-owned Esso gas stations. The rest of the company's 1700 Esso-branded retail fuel sites in Canada are already owned and operated by third parties, in what the company describes as the "branded wholesaler model". Mark Blinch/Reuters

Crude oil traded $2 higher before paring gains on Friday, on track for a second weekly increase, as chaos in Libya and stronger economic signals from the United States helped futures rebound from near-six-year lows.

Prices remain roughly 50 percent below their peak from the middle of last year, and no rapid recovery is expected amid rising global inventories and steady OPEC supply.

But concerns over dented output from Libya, a key Mediterranean oil producer, the anticipation of stronger U.S. jobs data and expectations of further declines in the U.S. oil-rig count later on Friday lent support to prices.

"Libya is really positive for oil prices," said Olivier Jakob of Petromatrix.

The market expects a bullish impact from a report on U.S. oil rigs that showed the largest decline in nearly 30 years last week, Jakob added. "That really triggered the rally last week."

Benchmark Brent crude futures rose by $2 before trading at $58.23 per barrel, a gain of $1.66, at 0928 GMT (04:28 a.m. EST). On Thursday, Brent closed up $2.41.

U.S. crude for March delivery also traded $2 higher, but pared gains to $52.13 per barrel, up $1.65. The contract finished with a gain of $2.03 the previous day.

Fighting across Libya, where two governments and parliaments allied to rival armed groups are vying for control, fueled concerns about the country's oil exports.

U.S. nonfarm payroll data due later on Friday is expected to show firm job growth in the world's largest oil consumer in January, a positive signal for demand.

These developments helped override worries over a global glut of oil, as well as cuts to the official selling price to Asia from top OPEC producer Saudi Arabia to the lowest level in at least 12 years.

The cut highlights Middle Eastern producers' battle to gain market share in Asia, but increases to official Saudi selling prices to the United States and Europe left a mixed signal.

"The official selling price to Europe increased quite a lot," Jakob said. "They're reflecting the tighter picture in the Mediterranean."

Still, many analysts forecast price gains to be short-lived - and limited. Growing numbers of OPEC delegates say they expect no rapid recovery in oil prices.

A strike at nine U.S. refineries accounting for 10 percent of U.S. capacity also headed into a sixth day after union leaders rejected the latest contract offer from lead negotiator Royal Dutch Shell Plc.