Oil prices rocket by nearly $4 a barrel

Oil prices surged by nearly $4 a barrel in late trade Friday, rebounding from six-year lows on month-end covering and signs the industry is quickly tightening exploration activities.

After a day trading slightly higher, around the $45 level, the US benchmark West Texas Intermediate crude for March delivery suddenly rocketed to more than $48.

At the end of the session, WTI closed at $48.24, a gain of $3.71 from Thursday.

In London, Brent North Sea crude for March followed a similar trajectory, trading slightly lower over most of the session and then soaring more than $4. The contract closed at $52.99 a barrel, a gain of $3.46.

Traders said that there was a lot of short-covering by big investors on the final trading day of the month that likely spurred the spike.

"The commodity funds have been heavily short on this market. It's the end of the month, and there is a little bit of a short-covering rally," said Phil Flynn of Price Futures Group.

"Yesterday, when oil went below $44, it couldn't follow through and it reversed course during the day, which is a signal for a bottom."

Also giving support were more signs of sharp cutbacks in the oil industry, which could portend a tighter market in the medium term.

Chevron said it would cut exploration and development spending by $5 billion this year.

And the Baker Hughes North America rig count, which gauges activity in the United States, Canada and Gulf of Mexico oil and gas fields, took a sharp fall over the past week, dropping by 128 rigs to 1,937. That compared with 2,393 a year ago.

"That's the lowest level we've seen in a couple of years. Perhaps that means tighter supplies in the future," said Flynn.