Global oil benchmark, Brent crude, on Thursday traded above $50 per barrel for the first time in 2016 as supply disruptions and increased global demand continue to fuel a recovery.
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Brent, against which Nigeria’s oil is priced, hit $50.14 per barrel at 8:30am. Oil boosted stocks on Wednesday on signs cuts in production were reducing overall supply in the U.S. Crude oil closed at its highest settlement since October 9, 2015, on Wednesday after a weekly read on U.S. inventories showed a larger-than-expected decline.
WTI crude has seen the biggest gain as it has rallied more than 92% since hitting its lows in early February; at the same time Brent crude is up nearly 56% since February.
But major supply outages in Canada from the wildfires around oil sands sites in Alberta knocked more than 1 million barrels per day of oil production offline for several weeks.
US crude production dropped for an 11th week to 8.77 million barrels a day, the Energy Information Administration reported Wednesday. Crude oil imports fell 4.7 percent to 7.3 million barrels per day last week, the EIA said.
The price of West Texas Intermediate oil rose 1.1% to $50.09 at 7:47 a.m. and hovered in that area for much of the morning before dropping back below $50.
“News about the United States inventory, coupled with Canada’s announcement gave prices the boost it needed to push past the $50 mark”, CMC Markets trader Alex Wijaya told AFP.
However, these shortfalls are being offset by increasing production by members of the Organization of the Petroleum Exporting Countries.
“However, supply issues do remain as Iran has been increasing its production while Saudi Arabia has indicated it might raise production further in 2016”.
Midwest and Rocky Mountain pipeline operators have cut the cost of transporting oil, as they vie for a shrunken supply of crude in the aftermath of Canada’s wildfires.
Buoyant stock markets also supported prices, with the Dow Jones industrial average .dji , the S&P 500 .spx and the Nasdaq Composite .ixic all climbing overnight.
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“The remarkable over 80 percent rally in oil since earlier this year may have been overdone, as the underlying macro conditions have not changed proportionally”, IG Markets analyst Bernard Aw said in a client note.
