Oil prices rebounded on Thursday as some players covered short positions after crude prices plumbed new 12-year lows amid concerns over Iran adding to a global glut faster than expected.
Brent, the global crude benchmark, earlier broke below $30 a barrel for a second day in a row before rebounding, as a U.N. nuclear watchdog appeared likely to confirm by Friday that Iran has curtailed its nuclear program as agreed with world powers, paving the way for sanctions to be lifted against its oil.
With options for U.S. crude's front-month contract expiring at Thursday's settlement, many players were covering positions, said traders.
"Natural covering interest is buoying the market as many had $30 as an objective," said Pete Donovan, broker at Liquidity Energy in New York. "With today being Feb WTI options expiration, I can't help but notice that the $30 put has easily the largest open interest of any of the nearby strikes."
Brent crude, the global benchmark, rose by 69 cents, or 2.3 percent, to $31 a barrel, after hitting an intraday high of $31.23. It fell earlier to $29.73, the weakest since February 2004.
Brent had lost about $7 a barrel, almost 20 percent of its value, over the past eight sessions.
West Texas Intermediate (WTI) ended up 72 cents, or 2.36 percent, at $31.20 a barrel, after a session high of $31.77. It hit a 12-year low of $29.93 earlier in the week.
Brent crude prices, which typically trade at a premium to U.S. oil, has recently slipped to the widest discount to WTI since November 2014.
Barclays said it had raised its estimates of Iranian oil supply on speedier-than-expected lifting of western sanctions. Analysts at the bank said they now assume that Iran will produce almost 700,000 barrels a day more in the fourth quarter of 2016 than over the same period in 2015.
Iran had said its exports would rise by 1 million barrels a day within six months of sanctions being lifted.
"This could drive prices down further in the short term purely on the basis of the psychological effect," analysts at Commerzbank wrote.
Data showing that U.S. crude inventories rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in distillates, which includes diesel and heating oil.
On the positive side, oil and gas projects worth $380 billion have now been postponed or canceled since 2014 as companies slash costs to survive the oil price crash, including $170 billion of projects planned between 2016 and 2020, according to a report from energy consultancy Wood Mackenzie.
Norway said on Thursday it expected investments in its oil and gas sector to fall to 135 billion crowns ($15.3 billion) this year, from 150 billion crowns in 2015.