Brent crude and WTI: Oil prices set for third weekly gain as IEA sparks optimism

Jessica Morris
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Oil prices are up nearly 50 per cent since hitting a historic low of $27 per barrel (Source: Getty)

Oil prices were heading for their third weekly gain today, after a top energy organisation said the worst could be over for the black stuff.

Brent crude, the global benchmark, rose 1.1 per cent to $40.5 per barrel in late afternoon trading. Meanwhile, West Texas Intermediate crude, the US benchmark, added 1.4 per cent to $38.37.

It comes after the International Energy Agency said oil prices might have bottomed, with higher cost US shale gas producers halting production and Iran's unexpectedly slow return to the market.

"There are clear signs that market forces ... are working their magic and higher-cost producers are cutting output," the Paris-based IEA said.

Oil prices are up nearly 50 per cent since hitting a historic low of $27 per barrel earlier this year, as US shale gas production begins to tail off and other big oil producers consider freezing output at January levels.

The IEA now expects non-Opec output will fall by 750,000 bpd this year, more than its previous estimate of 600,000 bpd. US production alone would decline by 530,000 bpd in 2016.

But Goldman Sachs, perhaps the world's most influential commodities bank, reiterated its view that the recent rally is premature.

"We reiterate our view that oil prices need to remain low for longer, as the oil and capital market rebalancing are only beginning," it said in a report.

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