The rich countries' energy watchdog yesterday said it had seen the first signs of a genuine recovery in oil demand, saying the recent oil price rally was at least partially underpinned by improved market fundamentals.

In its monthly market report, the International Energy Agency said: “While the rise in oil prices since mid-February has largely just tracked the upward momentum in financial markets, the latest surge in crude oil markets was partly fuelled by a long–awaited emergence of improving fundamentals.”

Nymex July West Texas Intermediate, the US crude benchmark, rose 57 cents to $71.89 a barrel – meaning the contract has gained 5.5 per cent this week. It had earlier hit $72.30, more than double the $32 low reached in February when concerns that the global recession would sap demand were greatest and the Opec oil producers' cartel had not yet aggressively cut back its supplies. ICE July Brent, the European benchmark, gained 25 cents to $71.05.