Oil prices jumped, rebounding off 12-year lows Thursday, as hopes for easier monetary policy in Europe calmed falling financial markets, but few traders believed the gains spelled an end to this year’s price decline of more than 25 percent.
Oil futures hit their lowest since 2003 this week as investors fretted over the prospects for prices amid a global glut of crude and slowing demand due to economic weakness, especially in world No. 2 economy, China.
U.S. data later on Thursday is expected to show that record-high crude stocks rose a further 2.8 million barrels last week.
Benchmark Brent futures for March delivery surged 29 cents, or 1 percent, to $28.17 a barrel. Brent has lost 26 percent of its value in January and is on track for its biggest monthly fall since 2008.
Front-month West Texas Intermediate (WTI) crude futures rose 20 cents, or 0.7 percent, to $28.55 per barrel.
U.S. and Brent futures turned positive after earlier declining, following comments by European Central Bank President Mario Draghi. He said it would be necessary to review the Bank’s monetary policy stance in March, fueling hopes for more quantitative easing.
“The market, especially the equity markets, want stimulus and need stimulus in order to keep the rally going,” said Brian LaRose, a technical analyst with United-ICAP.
“It’s all about economic expectations here and the U.S. equity markets are going to be in the driver’s seat over the near term.”
However, broad market sentiment remained bearish as producers around the world pump 1 million to 2 million barrels of crude every day in excess of demand, creating a huge overhang of stored oil.
Iran’s return to the oil market this month has added to the glut, after the lifting of international sanctions aimed at discouraging the country from obtaining nuclear weapons.
Weekly data from the Energy Information Administration due at 1600 GMT is expected to show a further rise in inventories. Data on Wednesday from the American Petroleum Institute showed crude inventories rose by 4.6 million barrels.