Oil had a major breather on Friday as Brent Oil Futures for March delivery reported a surge, going north of the $30 level. The commodity registered its largest rally in the last three months, as cold waves in the United States and Europe set expectations of higher oil demand ahead. Overall optimism across global markets also gave traders reason to convert their short positions, adding to the rally.

Oil Over $30

With this move, crude futures marked their first weekly gain so far this year. However, analysts maintain that the gain is not supported by a fundamental change in the supply and demand scenario.

Crude Brent was up to $30.87 a barrel, recovering from its 2003 low level of $27.10. U.S. crude futures for March delivery were also up by 5.15% to $31.05 a barrel. The move points to the possibility that the market has brushed off concerns raised by the International Energy Agency (IEA) earlier this week about the oil oversupply remaining until the end of 2016. Some traders are betting on a bottom as derivative contracts bought over the last week give speculators an option to buy oil at $40 per barrel by the end of 2016.

Markets cheer the rebound

The oil price rebound has lifted market sentiment as both Asian and European markets closed in the green last week. U.S. markets too were relieved after the east coast, and some of parts of Europe came under the grip of snowstorms and freezing weather conditions, which fueled hopes of liftoff in oil demand.

The EIA issued an update on the weekly petroleum stockpile report a day earlier, where it mentioned that crude oil reserves surged 3.979 million barrels to 486.537 million barrels during the week ended on January 15. The report came a day after the American Petroleum Institute’s (API) report, which said that crude reserves increased by 4.6 million barrels for the week ended last Friday.