NEW YORK Brent crude prices touched a four-month high on Monday as a rally in wider commodities markets encouraged buying ahead of a meeting of oil producers in Doha next Sunday, aimed at freezing current output levels.
After hitting the highest level since December 7, Brent crude futures, the global benchmark, retreated slightly and then partially recovered, staying within a tight range.
The market is having difficulty maintaining a higher price because of the storage overhang, said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
"We're still above 9 million barrels of U.S. production, and of course there's a massive overhang in storage that you can't get around," McGillian said.
Data from energy information provider Genscape at 10 a.m. (1400 GMT) suggested the U.S. will have a smaller-than-expected draw on stockpiles this week, prompting the market to pull back slightly, according to market participants.
Brent was up 84 cents at $42.78 a barrel by 12:06 p.m. (1606 GMT), having touched a session high of $43.06, the highest level since December 7.
U.S. WTI crude also rose on Monday, gaining 61 cents to $40.33 a barrel and touching an intra-day high of $40.75, near a three-week high.
Prices are likely to remain in a range of $36 to $42, McGillian said.
"It's all going to be about the Doha meeting on Sunday," said Tariq Zahir at Tyche Capital in Laurel Hollow, New York. Still, even the agreement may have only moderate market impact, he cautioned. "Even if you do have an agreement on it, it's not going to do much: It's not a production cut."
Oil was also caught in a generally bullish pattern of trading across commodities.
"All commodities are going up. It could be (investors) buying into dips every now and then as people are looking for opportunities to get long," said Abhishek Deshpande, commodity strategist at Natixis in London.
Gold prices also touched their highest level in almost three weeks, while silver and platinum were up more than 2 percent.
A weaker U.S. dollar gave impetus to buyers as commodities priced in the currency became cheaper to purchase.
Oil traders continue to place hopes on the oil producers' meeting to prop up crude prices that have been severely depressed by a global supply glut.
But analysts at Goldman Sachs, who expect oil to average $35 a barrel in the second quarter, cautioned that the outcome of the meeting in Qatar could prove bearish for the market.
Last week many oil market speculators agreed with a more bearish outlook as data from the InterContinentalExchange (ICE) showed that net long positions on Brent had been cut to 355,225 contracts in the week to April 5.
However, analysts are forecasting firmer demand for oil over the longer term.
Researchers at Bernstein expect global oil demand to increase at a mean annual rate of 1.4 percent between 2016 and 2020, compared with annual growth of 1.1 percent over the past decade.
"We expect oil markets to rebalance by the end of 2016. This will allow prices to recover towards the marginal cost of $60 per barrel," Bernstein said, adding that it expects global demand to reach 101.1 million bpd by 2020, from the current 94.6 million bpd.
(Reporting by Jessica Resnick-Ault in New York; Additional reporting by Henning Gloystein in Singapore and Karolin Schaps in London; Editing by Andrea Ricci)
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