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By Bloomberg

Brent crude in London headed for its biggest monthly gain since 2009, trading at the steepest premium in more than a year to U.S. oil prices weighed down by record domestic supply.

The benchmark for more than half the world’s oil is climbing amid speculation that global demand will recover this year. West Texas Intermediate in New York is lagging behind as government data show crude inventories expanded to 434.1 million, the highest level in weekly data that started August 1982. Brent futures rose as much as 2 percent and are up 15.4 percent this month.

A market glut drove prices almost 50 percent lower in 2014 as the U.S. pumped at the fastest pace in more than three decades and OPEC refrained from cutting its output quota. The market will rebalance in the next several months as consumption gains and supply is curbed, according to the International Energy Agency, while Saudi Arabia’s Oil Minister Ali al-Naimi said this week that demand is growing.

“What’s changed over the past few weeks in crude is that the short-term participants have become much more balanced, whereas they were overwhelmingly bearish for a long time,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “We’re returning to a more normal trading pattern, that is, we’re tending to reverse overnight moves as the short-term trading interests reposition themselves.”

Crude Stockpiles

Brent for April settlement gained as much as $1.19 to $61.24 a barrel on the London-based ICE Futures Europe exchange and was at $61.21 at 3:43 p.m. Singapore time. The contract slid $1.58 to $60.05 on Thursday. Prices are poised for the biggest monthly advance since May 2009 and are up 6.8 percent this year.

WTI for April delivery was up $1.07, or 2.2 percent, at $49.24 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 5.5 percent to $48.17 on Thursday, the lowest since Jan. 29. While prices are 2.2 percent higher in February, they are down about 6.6 percent the past two weeks.

The U.S. benchmark crude is trading at $12.03 a barrel below Brent. It closed at a discount of $11.88 on Thursday, the widest since January 2014.

U.S. crude stockpiles increased for a seventh week through Feb. 20 and have surged above the five-year average level for this time of the year, according to the Energy Information Administration. Production rose to 9.29 million barrels a day, the most in weekly estimates from the Energy Department’s statistical arm since January 1983.

The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.

Oil Demand

Oil as low as $45 a barrel is unsustainable, Fatih Birol, the chief economist for the International Energy Agency, said at a conference in London Thursday. Investment cuts in the U.S., Russia and Brazil will curtail output growth, bringing supply and demand back in line, he said.

Drillers in the U.S. cut the number of rigs in service to 1,019 last week, the smallest level since July 2011, according to data from Baker Hughes Inc.

The market has turned “calm,” al-Naimi said on Wednesday. Saudi Arabia is the biggest producer in the Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil.

WTI may drop next week, a Bloomberg News survey showed. Seventeen of 34 analysts and traders, or 50 percent, forecast crude will drop through March 6, while nine predict an increase and eight see prices little changed.