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Oil rallies hard, but this is not the bottom

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Oil surged above $30 a barrel temporarily in the biggest relief rally in three months, but crude has still not found a floor and U.S. economic data and earnings season could play a big role in driving prices in the near term.

Oil and other risk assets were boosted Thursday by dovish comments from European Central Bank President Mario Draghi, who said it would be necessary to review the central bank's monetary policy stance in March. That sparked expectations of more quantitative easing from the ECB.

Crude settled up 4.2 percent Thursday at $29.53 per barrel after rising more than 6 percent earlier in the session. Traders also found a silver lining in an otherwise bearish U.S. government inventory report which showed a build in oil supplies and another big 4 million barrel build in gasoline supplies. Encouraging to bulls, however, was the increase in distillate demand and drawdown of 1 million barrels in distillates, or diesel and heating oil.

"Our view is that prices should average in this range for the quarter," said Michael Cohen, head of energy commodities research at Barclays. "We don't see levels below this as being sustained. This is in line with our forecast. We also think the market is prone to these types of moves, given the positioning."