Oil up despite oversupply threat

Oil staged its first rally in three days gaining 2 percent despite warnings of more oversupply as a result of OPEC’s decision to keep pumping crude without restraint.

A strong dollar, which often depresses commodity prices, failed to stem the late run-up in Brent and US crude futures, despite limiting their gains in choppy early trade.

Crude’s biggest producers and shippers in OPEC agreed at a meeting in Vienna to stick to a policy of unconstrained output for another six months.

Oil prices rose right after the decision, as market bulls tried to make up for losses. Brent and US crude fell nearly 3 percent a day in those previous two sessions as traders locked in advance bets that OPEC would not cut supply.

But the dollar’s surge on a stronger-than-expected US jobs report for May pushed crude down more than $1 a barrel. Brent hit seven-week lows, descending into sharp volatility until the late rally.

Brent settled up $1.28, or 2.1 percent, at $63.31 a barrel, after hitting the April 16 low of $60.94. For the week, it fell 3.6percent. US crude jumped $1.13, or almost 2 percent, to settle at $59.13. It lost 2 percent on the week.

The discount, or so-called “contango,” between US crude’s front-month and second-month widened to its largest in a week as oversupply worries mounted after the OPEC decision.

Data also showed US oil drillers boosted activity in four key shale basins this week despite an overall decline in oil rigs.