Oil's strong rise in April boosts hopes price rout is over

Oil prices posted the strongest monthly gain since 2009 in April as US production showed signs of slowing, leading many traders to bet the worst of the oil rout is over.

The international benchmark Ice June Brent rallied more than 20 per cent during the month, hitting a high of $66.93 a barrel after slumping to a five-year low near $45 a barrel in January.

The US benchmark, Nymex June West Texas Intermediate, rallied 25 per cent over the month and hit a year-high of $59.90 a barrel on Friday.

The rally in prices is raising questions, however, over whether Opec's aim of slowing output outside the producer cartel will be as effective as first thought.

US oil producers are starting to hedge more production, traders say, locking in better prices for later years. The number of rigs drilling for oil in the country has fallen more than 50 per cent, slowing the shale output boom, with prices averaging roughly half the level of early 2014 so far this year.

"The flat price for 2016 is getting close to levels that would start to bring some drilling back in service when prices are hedged," said Olivier Jakob at consultancy Petromatrix.

Opec decided in November to maintain output to protect its share of the market, rather than cut production to support the falling oil price.

Saudi Arabia has since increased production to above 10m barrels per day, while Iraqi exports hit a record above 3m b/d in April.

Metals have also rallied, rising as the US dollar weakened and as signs emerged of stronger demand in China.

Copper traded on the London Metal Exchange posted its largest weekly gain since the end of 2012, ending the week up 5 per cent and hitting its highest level since December. That helped push up shares of copper miners, with US miner Freeport-McMoRan rising more than 13 per cent for the past week.

Among other metals, nickel, which is used to make stainless steel, rose 6 per cent over the week.

The copper move was boosted by short-covering of investor positions, though demand was also picking up in China after a slow March and April, Vivienne Lloyd, analyst at Macquarie, said.

Stocks of the metal in warehouses monitored by the Shanghai Futures Exchange have fallen over the past two weeks while the copper forward curve on the exchange has moved into backwardation, meaning prices for earlier delivery trade higher than for future dates, a sign of stronger demand.

"The picture is shifting in China," Ms Lloyd said.

In precious metals, gold fell to a six-week low of $1,171.08 a troy ounce on Friday despite a weaker dollar. Analysts said so-called haven assets like precious metals had fallen from favour amid the broader rally.

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