US EIA expects gradual reduction of oil oversupply

Just like the market, however, the EIA is convinced that the oversupply is being gradually reduced, partly on the back of increased demand. 

The EIA points to a shrinking contango as one indication of a tightening market, whereas the front-month Brent contract at the end of March was still priced almost $8 lower than the contract due in a year's time, the price gap at present is "only" $4.5. 

Whether the market will be increasingly able to "see past" the current glut will also depend on how US production develops, if the predicted decrease in production fails to materialize partly because of the higher prices the "market optimism" could prove to have been premature. 

The US oil rig count due to be published later today will give an indication of which way US production is headed.