Oil hits '16 high above $42
An employee works at the Bashneft-Novoil refinery in Ufa, Russia.
London - There is still steam in the rally; inventories build at slower pace.
Oil rose above $42 a barrel on Friday, hitting its highest this year and extending a rally into a fourth week on expectations of a production freeze by major exporters, stronger seasonal demand and dollar weakness.
Brent crude's front-month contract was up 59 cents at $42.13 a barrel by 1113 GMT, having touched a 2016 high of $42.31.
US crude gained 64 cents to $40.84 a barrel after rising as high as $40.93. The benchmark had jumped by 4.5 per cent to close the previous session at $40.20.
Oil prices have surged by more than 50 per cent from 12-year lows reached in December, bolstered as the Organization of the Petroleum Exporting Countries (Opec) floated the idea of a production freeze, boosting Brent from about $27 and US crude from around $26.
Many analysts think there is still steam in the rally.
"We are leaving the period of low demand and starting to move toward the period when demand increases over the summer," said Olivier Jakob, oil market analyst at Petromatrix at Zug in Switzerland.
He added that the massive oil glut that had helped to hammer prices last year at last appears to be stabilising. "We're moving towards looking at an old surplus, rather than a new one being built up," he said, adding that it is likely that Brent will stabilise around the mid-$40s.
Crude inventories in the United States increased by 1.3 million barrels in the week to March 11, to a record high of 523.2 million barrels, though that was a much smaller build than the 3.4 million barrels expected by analysts, the Energy Information Administration said on Wednesday.
Analysts said that dollar weakness was also lifting oil. The dollar index is down 3.2 per cent so far this month. A weaker dollar makes oil, which is priced in the US currency, more affordable to holders of other currencies.