Oil up on pre-holiday short-covering but down for fourth week

Oil bounced higher on Friday as selling pressure from a six-month price rout eased for a second time this week on short-covering, helped by fresh buying in U.S. crude before the expiry of the front-month contract.

U.S. West Texas Intermediate (WTI) crude futures traded above $55 a barrel while benchmark Brent hovered above the psychologically key $60 level, gaining over 2 percent in New York's morning trade.

On a weekly basis though, Brent and U.S. crude were headed for a fourth straight week of losses, due to earlier declines this week on long-running worries about a huge supply overhang in oil.

Brent is down nearly 14 percent and WTI has shed nearly 16 percent in December, and both have lost roughly 50 percent since their June highs.

"At least I'm not convinced that with Brent at $60 or WTI above $55, we've seen the bottom yet," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York.

"If the market keeps going higher, it'll be a sign for me to sell into the strength, doing about 20 percent more of my normal size, to take advantage of the exaggerated moves we'll be seeing from the low volumes during the Christmas and New Year weeks."

Brent's front-month LCOc1 was up $1.18 at $60.46 a barrel by 11:25 a.m. EST. The contract settled down $1.91 on Thursday, after trading as high as $63.70 a barrel.

WTI's January contract CLF5, which expires at Friday's settlement, was up $1.64 to $55.75 a barrel after hitting a session high at $56.25. The February contract CLG5, which becomes WTI's front-month from Monday, was up $1.71 at $56.07.

"There could be more fireworks in WTI later today from the contract switching, and we may even finish lower," said Phil Flynn, analyst at the Price Futures Group in Chicago.

Oil began tumbling in June on worries about fast-growing U.S. shale crude supplies and accelerated its fall after OPEC's decision in November not to cut output.

Oil companies have been announcing cuts in exploration and capital spending as the price rout makes some drilling projects uneconomic.

But energy consultancy Wood Mackenzie said on Friday drillers had to do more.

On top of $9 billion in spending cuts already announced, drillers need to reduce spending next year by another $170 billion, or 37 percent, from 2014 if Brent remains at current levels, it said.

Reuters