By Barani Krishnan
NEW YORK (Reuters) - Brent crude rose on Monday, hitting a 2016 peak above $40 a barrel as producers sought a new anchor price for oil after a selloff that has lasted nearly two years, although some analysts warned the global glut is still big.
Global crude prices have risen more than 40 percent since two months ago when they hit 12-year lows. Monday's gains were helped by data showing a smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures and talk that OPEC was looking at a $50 bottom.
Oil's rebound from lows of around $26 a barrel was also driven by chart-related buying and asset rotation by investors that resulted in higher allocations into commodities such as oil and copper, as well as equities. U.S. equities have risen about 8 percent since mid-February while Treasuries have weakened. Asian equities hit 2-month highs on Monday.
"Money flows from broader financial markets are powering this broader rally in oil," said Scott Shelton, energy broker with ICAP (LON:IAP) in Durham, North Carolina. "I don’t think the energy fundamentals for the next few days are going to matter much as the market is making a transition."
Brent (LCOc1), the global crude benchmark, was up $1.20 at $39.92 by 11:12 a.m EST. Earlier, it hit a 2016 high of $40.11, after the 12-year low of $27.10 on Jan. 20.
U.S. crude (CLc1) was up $1.10 at $37.02 a barrel, after hitting a two-month high at $37.46. On Feb. 11, it hit a 2003 low of $26.05.
Price gains accelerated after market intelligence firm Genscape reported that crude stockpiles at the Cushing, Oklahoma delivery hub rose by 670,714 barrels to reach 68.8 million during the week ended March 4, traders said. In the previous week to Feb. 26, Genscape reported that Cushing inventories rose by more than 1 million barrels.
Bets on rising Brent crude prices hit a record high in the week to March 1. Major OPEC producers are privately starting to talk about a new oil price equilibrium of $50, New York-based consultancy PIRA told Reuters.
Technical analysts said the oil rally could be nearing exhaustion at $40. Others said the global crude market remained oversupplied by around 2 million barrels per day, while higher prices raised the prospect of U.S. shale oil producers adding more drilling rigs after recent cutbacks.
Morgan Stanley said "a large portion" of the rally was due to dollar depreciation.
"Thus, prices can continue to rally on headlines and a dollar pullback, but the upside should be limited by bloated global inventories and producer hedging," it said in a note.