June 30 (UPI) -- Crude oil prices were on pace for another day of gains Friday, though it may be an indication of a correction from last week's steep losses.
"Crude was in correction mode this week, and on course for an eighth straight day of gains Friday in Asia," Vandana Hari, an industry analyst for Vanda Insights, said in an emailed newsletter. "But the price recovery has been modest compared with the pounding of recent weeks, and is characteristic of short-covering and bargain-hunting buying, rather than a shift in fundamentals, which are still firmly pointing to a supply glut."
Data this week suggested some of the supply-side strains were easing, after mid-June reports indicated gains in crude oil and gasoline inventories in the United States, the world's biggest economy and largest consumer of fossil fuels. Demand for commercial fuels could surge in the coming days as American holiday travelers take to the road for a long weekend to commemorate Independence Day, July 4.
AAA forecasts 37.5 million Americans will drive to their holiday destination. Data this week, meanwhile, showed U.S. crude oil production declined about 100,000 barrels per day for the biggest decline so far this year.
"This has been enough to encourage some guarded optimism among investors that the oil market is beginning to move back into balance," Cailin Birch, a commodities Analyst at the Economist Intelligence Unit, said in a statement.
Crude oil prices are up more than 5 percent from one week ago, but WTI is still about $3 less per barrel than at the start of June.
A report released earlier in the week from Societe General said there were moderately bullish trends emerging short-term, but crude oil stockpiles remained "stubbornly high."
Birch added the recent rally in crude oil prices "may be a bit premature," adding U.S. oil production is balanced by modest consumption growth and some members of the Organization of Petroleum Exporting Countries are churning out more oil even as other members work to correct the supply overhang with managed declines.
A report released from RBC Capital Markets, meanwhile, said there are lingering risks in the energy market from ongoing disputes between Qatar and its Persian Gulf neighbors.
"Several factors risk tipping the market back into over-supply," Birch said.