NEW YORK Global oil prices surged as much as 12 percent on Friday after a report once again suggested OPEC might finally agree to cut production to reduce the world glut, while a bounce in stock markets fed appetite for risk.
Despite the strong daily gain, oil prices were poised to end the week down as much as 5 percent.
The United Arab Emirates' energy minister said the Organization of the Petroleum Exporting Countries was willing to cooperate on an output cut, the Wall Street Journal reported on Thursday after crude futures settled in U.S. trade.
Many traders were skeptical at first about the report, noting that Venezuela and Russia had tried in vain earlier in the week to stir Saudi Arabia and other major producers into agreeing to output cuts.
But after a 75 percent price slump since mid-2014 that has taken crude prices to more than 12-year lows, many were inclined to believe that a rebound was due sooner or later if production tightens or demand picks up.
"We expect declining U.S. oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year," Frankfurt-based Commerzbank said in a note.
U.S. crude contracts over the next five years were trading under $50 a barrel on Friday, rising above that level only from November 2021 onwards.
U.S. crude's front-month settled up $3.23, or 12.3 percent, at $29.44 per barrel, reaching a session high of $29.66. It hit a 12-year low of $26.05 the previous day. For the week, it lost 4.7 percent.
Brent's front-month closed up $3.30 at $33.36 a barrel, having slid below $30 on Thursday. Weekly losses were pared to 2 percent.
Prices extended gains after data showed an eighth straight weekly drop in the number of U.S. rigs drilling for oil. Oil also got a boost from the rally in global equity markets. [MKTS/GLOB] [.N]
Some cited Monday's Presidents Day holiday in the United States, saying fewer players wanted a short position in oil ahead of the longer weekend break for the New York crude market.
But others, like Tyche Capital Advisors' Tariq Zahir, were hoping to profit again from bearish bets once the rally peaks. "It gives me great opportunity to put out new shorts in crude spreads," he said.
Many expected wilder price swings in coming weeks.
"It's not a one-way price movement anymore," said ABN AMRO's senior energy economist Hans van Cleef. "We will see a period of high volatility."
(Additional reporting by Libby George and Henning Gloystein in Singapore; Editing by David Gregorio and Lisa Shumaker)