Brent hits three-month high on hopes for producer price support

Oil prices rose one percent on Tuesday, with benchmark Brent prices hitting a three-month high on hopes for a coordinated approach by major producers to support prices.

Brent crude futures LOCc1 were trading at $41.43 a barrel at 1257 GMT, their highest since Dec. 9, up 59 cents on the day. On Monday the contract had climbed by 5.5 percent in intra-day trading, and it has now gained more than 50 percent since its 2016 low on Jan. 20.

U.S. West Texas Intermediate (WTI) futures were up 38 cents at $38.28 a barrel.

"The bullish sentiment continues to push prices up, or the absence of negative news," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

News of a meeting of Latin American crude producers set in Quito for Friday had boosted oil prices on Monday, and bullish sentiment swept over into Tuesday's session.

OPEC members and other producers in Russia are also due to meet for talks on March 20, according to the Nigerian petroleum minister.

Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board.

"I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City.

OPEC member Kuwait is currently producing 3 million barrels of oil per day (bpd), he added.

But analysts at Goldman Sachs said in a report on Tuesday that the price rally was premature and unsustainable.

"While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment," the analysts wrote.

"Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it did last spring."

SEB chief commodities analyst Bjarne Schieldrop agreed, saying that U.S. shale oil rig numbers could soon rise again, halting the recent price rally.

A global supply glut that has brought prices down prices from highs reached in mid-2014 continues to weigh on the market.

North Sea crude supply is expected to rise to its highest in four years in April, holding above 2 million bpd for an eighth consecutive month, according to monthly loading programs.

On the demand side, China's crude imports jumped 19.1 percent between January and February to 31.80 million tonnes, or about 8 million barrels per day, despite overall weak trading figures released on Tuesday.
"Higher 'teapot' (independent refinery) demand and stronger refining margins ... have contributed to increased imports. Falling domestic crude production is also supportive," said Virendra Chauhan of Energy Aspects.

Despite strong oil demand, questions about the sustainability of growing consumption weighed on markets after China's overall exports tumbled by a quarter in February.

China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country's Passenger Car Association showed.

"This is really a poor start for trade this year," said Zhang Yongjun, senior economist at the China Centre for International Economic Exchanges.