By Karolin Schaps
LONDON (Reuters) - Oil prices rose more than 3 percent on Tuesday as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year.
Brent crude futures (LCOc1), the global benchmark, traded up $1.06, or 3.7 percent, at $29.61 a barrel by 7.55 a.m. ET. U.S. crude futures (CLc1) were up 30 cents at $29.72 a barrel, reverting to a discount to Brent prices. Both contracts breached the $30 mark earlier in the session.
"It seems to be a healthy upside correction in an otherwise downtrending market," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Traders said prices drew support from strong oil demand in China. Preliminary Reuters calculations based on government figures showed record oil consumption of 10.32 million barrels per day (bpd), up 2.5 percent from 2014, defying slowing growth in the world's second-largest economy.
But oil prices remained near 12-year lows as a global glut was set to last until at least late 2016, according to the International Energy Agency, which advises industrialized countries on energy policy.
The agency said oil prices could fall below current levels.
"While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in oversupply," the IEA said.
Global oil demand fell to a one-year low in the fourth quarter of 2015, the IEA added, due to mild weather.
"It's not looking good. There is no reason to believe why and how prices will recover by the end of 2017," Abhishek Deshpande, oil analyst at Natixis, told Reuters Global Oil Forum.
The oversupply is set to worsen with the return of Iranian barrels to the market following the lifting of nuclear-related Western sanctions.
Iran said it could increase oil output by 500,000 bpd and issued an order to start the ramp-up on Monday.
Most analysts expect Iran's full return to oil markets to be relatively slow due to the need to overhaul its infrastructure following years of under-investment, but the country is also estimated to have stored 12-14 million barrels of crude and 24 million barrels of condensates for immediate sale.
China's CNOOC said it aimed to cut oil and gas production this year and expected output to rebound in 2018.