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NEW YORK (Reuters) - Oil prices rose nearly 2 percent on Friday as traders covered short positions after four days of sharp losses, and the U.S. oil rig count fell for a seventh week in a row.
U.S. crude and Brent racked up their steepest weekly declines in eight weeks after an International Energy Agency report on Tuesday predicted that the global market would remain oversupplied through 2016.
"The reality of the global oversupply came in the forefront for most of the week giving back a major portion of last week’s gains," said Energy Management Institute analyst Dominick Chirichella.
U.S. crude settled up 88 cents at $47.26 per barrel, down almost 5 percent on the week. Brent for December delivery settled up 73 cents at $50.46 a barrel, down about 4 percent on the week.
Prices rose early in the session on short-covering, and buying continued after Baker Hughes Inc BHI.N reported that the U.S. oil rig count dropped by 10 to 595 this week, the lowest since July 2010.
Strong equity markets supported crude prices. Wall Street trended higher after a two-month peak in European share prices.
"People are paying closer attention to the rig count to indicate a drop in U.S. production. Oil rigs down to 595 - that is a primary support," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
But, ultimately, the overall fundamentals of oversupply are bearish, McGillian said. "Until we see a sizeable decline in storage in the U.S. I think the market will struggle to sustain any rally."
On Thursday, the U.S. Energy Information Administration (EIA) said the country's crude inventories rose by 7.6 million barrels last week, more than double the build of 2.9 million barrels expected by analysts in a Reuters poll. [EIA/S]
A meeting of OPEC technical experts in Vienna on Oct. 21 may indicate whether sentiment is shifting within the producer group about maintaining output levels as prices remain muted.
"Some glimmers of hope from the OPEC meeting could trigger a rally (next week)," said Richard Hastings, macro strategist at Seaport Global Securities.
Chinese economic data over the weekend should influence early price action for crude oil in the week ahead, analysts said.
"I would anticipate a choppy and potentially volatile week ahead with November WTI expiry on Tuesday and the OPEC and non-OPEC producer meeting on Wednesday," said Tony Headrick, energy analyst at CHS Hedging.
Additional reporting by Barani Krishnan and Scott Disavino in New York, Karolin Schaps in London, Meeyoung Cho in Seoul; Editing by Marguerita Choy