Oil prices traded roughly flat on Thursday after ballooning U.S. crude inventories and a lack of any fresh action from the world’s largest producer to temper supply snuffed out some of the bullish sentiment that has built this week.
Brent futures fell 11 cents to $36.82 a barrel at 6:50 a.m. (1150 GMT), while U.S. crude futures rose 2 cent to $34.68.
“Prices must fall once again to reach bottom in a way that really shuts down production. I don’t think a freeze is the solution,” Natixis commodities strategist Abhishek Deshpande said.
“That is the only true way of really turning around prices sustainably and for good…once that happens, there will be a true turning point and, for me, that kind of bottom is still below $25.”
U.S. crude inventories rose 10.4 million barrels to a fresh record of 517.98 million barrels last week.
Around 1 million to 2 million barrels of crude is being produced globally every day in excess of demand, contributing to a 70 percent fall in oil prices since mid-2014.
An agreement struck in February by some big producers, led by Russia and Saudi Arabia, to freeze output at January levels is expected to do little to reduce the oversupply, not least because output in the first month of the year was at, or near, record highs.
“We continue to remain wary of possible rallies,” said Daniel Ang of brokerage Phillip Futures.
Prices have risen since February thanks to slowing U.S. output and signs of financial distress among the higher-cost producers that might signal further supply cuts.
U.S. crude output fell for a third month in December, as struggling oil companies succumb to the price rout.
Seasonally, the second quarter of the year tends to be one of the weakest, as spring refinery maintenance cuts crude demand.
Reuters data shows on average over the last 15 years, Brent has gained 4.9 percent in the second quarter, compared with an average gain of nearly 7.5 percent in the third quarter, usually the strongest in terms of price performance.
Market watchers have said there has been more bullishness spreading through the market.
“The market has suddenly started to focus on bullish headlines. This has created huge inflows, buying from hedge funds,” said Oystein Berentsen, managing director of crude at Strong Petroleum in Singapore.