Oil gushes higher as it heads for best week in five

 
Jessica Morris
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A wave of optimism swept across oil markets this afternoon (Source: Getty)

Oil prices sprung into action this afternoon, helped by rising hopes for a freeze deal when the world's major oil producers meet next Sunday.

Brent crude, the global benchmark, rose 4.6 per cent to $41.23 per barrel this afternoon, and it's up 6.6 per cent for the week. If it holds onto these gains Brent could clock its best week in five.

Meanwhile, US West Texas Intermediate, added 5.5 per cent to $39.29 per barrel. It's up 6.7 per cent for the week, helping WTI hurtle towards best week in a month.

Read more: Where big banks think the oil price is heading next

Sources told Reuters that Russia, which is due to lead non-Opec countries at the talks, could see its production fall this month. Similarly, the country's energy minister expressed hopes that the oil producing nations will be able to reach a freeze deal.

The surprise decline in US oil stocks also provided support, with data from the Energy Information Administration showing levels at the Cushing, Oklahoma hub dropped by more than 480,000 barrels due to a shutdown of the Keystone pipeline.

Elsewhere, summer maintenance to the ageing platforms scattered across the North Sea also boosted short-term prices.

"You have declining supply in the United States and a declining rig rate," said Bjarne Schieldrop, chief commodities analyst at SEB Bank in Oslo.

"You mix that with outages in Nigeria ... and put Doha on top of it, and your eyes are looking towards the tightening of the market."

Read more: These are the "fragile five" Opec members that could collapse if oil prices don't stabilise

But the renewed wave of optimism didn't carry everyone, with some analysts warning prices could fall in the near term.

A surplus of oil was growing in Asia due to refinery maintenance. In Iraq, exports from its southern ports are expected to rise in April, while Iran has refused to freeze oil output until it's producing at a pre-sanction level of four million barrels per day.

"We believe the current oil price is unsustainable and expect a fundamental price recovery when markets move into better balance in mid- to late-second half of 2016," investment bank Jefferies said.

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