Investing.com - Oil prices rallied to fresh two-month highs on Monday, extending last week’s strong gains amid the growing view that a 20-month-long market rout is finally coming to an end.
On the ICE Futures Exchange in London, Brent oil for May delivery hit an intraday peak of $39.50, a level not seen since January 4, before giving back some gains to trade at $39.31, up 59 cents, or 1.52%, by 14:40GMT, or 9:40AM ET.
London-traded Brent futures soared $1.65, or 4.45%, on Friday. The international benchmark gained $3.62, or 10.31%, last week, as continued hopes major oil producers will discuss a potential output freeze lifted prices.
Brent futures are up by roughly 25%, since briefly dropping below $30 a barrel on February 11. Short-covering began in mid-February after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January levels, provided other oil exporters joined in.
A meeting is planned later this month in which producers will discuss the details of the proposed action.
Elsewhere, crude oil for April delivery on the New York Mercantile Exchange tacked on 64 cents, or 1.78% to trade at $36.56 a barrel, after rising to a session high of $36.72, the most since January 5.
On Friday, New York-traded oil futures rallied $1.35, or 3.91%, amid indications U.S. shale oil drillers are cutting back on production.
Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. decreased by eight last week to 392, the 11th straight weekly decline and the lowest level since 2009.
There are now nearly 69% fewer rigs of all kinds from a peak of 1,609 in October 2014. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future.
U.S. crude futures surged $3.20, or 9.58%, last week, the third straight weekly gain. Since falling to 13-year lows at $26.05 on February 11, Nymex oil prices have rebounded by approximately 30% as a decline in U.S. shale production boosted sentiment.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share, driving down prices by more than 70% over the past 20 months.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at $2.75 a barrel, compared to a gap of $2.80 by close of trade on Friday.
In the week ahead, oil traders will be focusing on U.S. stockpile data on Tuesday and Wednesday for further evidence of a slowdown in U.S. production amid mounting concerns over a domestic supply glut.
Developments surrounding a potential deal between OPEC and non-OPEC producers to cap output will also be in focus.