Oil prices mixed as market ponders whether crude has bottomed out

Brent futures LCOc1 were trading at $35.20 per barrel at 0717 GMT, up 10 cents from their previous close. Since Feb. 11, the last time Brent was below $30, the crude benchmark has risen nearly 18 percent.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were weaker, weighed down by record American crude inventories, shedding 9 cents to $32.69 a barrel. But that's after gaining a third in value since Feb. 11.

"Clearly there is still a lot of downside risk ... But the U.S. crude market 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 data on U.S. production is also supportive as it indicates that the low prices are finally having an impact," he said.

U.S. shale producers cut the number of oil rigs in operation for a 10th week in a row to the lowest since December 2009, data showed on Friday, which analysts expect will lead to an output fall of 600,000 barrels per day (bpd) this year.

"The total oil rig count is now falling below that required to sustain oil production and as a result production levels are beginning to fall," shipping brokerage Banchero Costa said, adding that U.S. oil production in 2016 would fall 5 percent from the previous year to 8.7 million bpd.

Morgan Stanley said a potential Russian-Saudi agreement to freeze output at January levels could also drive prices.

"Russia said production freeze agreement discussions should end on March 1 ... Any news of progression could drive headlines and prices," the bank said.

The bank added, though, that this would do little to rein in a global production overhang, which is estimated to be between 1 million to 2 million bpd and is accompanied with a "deceleration in demand growth."

Trading data, however, suggested shifting sentiment. The amount of open positions in WTI crude contracts that bet on a further fall in prices has fallen over 17 percent 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 U.S. shale crude output and growing gasoline demand.

(reuters.com)