Oil prices are charging towards their best month in seven years

Jessica Morris
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The US and global benchmarks hit their highest level this year (Source: Getty)

Oil prices whizzed higher this afternoon, leaving them set to clock their biggest monthly gain in seven years.

It comes as both the US and global benchmarks hit their highest level this year, trading at $46.27 and $48.30 per barrel respectively.

The weak dollar and falling US production helped offset concerns over a lingering glut of the black stuff.

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Investment bank Jefferies said the market "is coming into better balance" and will flip into undersupply in the second half of the year.

But others have warned the recent rally is driven by investors betting on the oil market, rather than any actual improvements to the underlying imbalance.

"The issue is that we haven't seen price rallies ... correlate with fundamentals," said Hamza Khan, senior commodity strategist at ING.

"The fundamentals - high stocks, high production - haven't changed."

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Deutsche Bank added that a looming rise in production by the Organisation of the Petroleum Exporting Countries could cap recent gains. Iran, Iraq, Nigeria and the United Arab Emirates are all expected to ramp up production.

But Bank of America cautioned "non-Opec oil supply is indeed hanging off a cliff", and predicted global output will shrink on an annual basis in April or May for the first time since 2013.

There are also concerns recession-stricken Venezuela will struggle to keep its oil pumps running, leading to a decline in production.

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