The upsurge was due to a larger-than-expected draw in US crude oil inventories last week indicated buyers are starting to mop up spare supply.
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In Europe, Brent crude – which is used to price global oils – cracked the $50 mark as well. “We are entering the USA driving period so seasonal demand might provide underlying support to oil prices”, said Yvanne Lai, senior analyst at National Australia Bank.
Crude oil prices hit the sweet spot of $50 a barrel in yesterday’s trading.
Global stock markets were mostly higher Thursday after oil prices hit $50 a barrel for the first time since November.
In addition to supply shortages caused by the fire-related temporary shutdown of Alberta oilsands operations, crude prices have responded to a drop in Nigeria’s output this year. But the recent disruptions to oil output occasioned by militant attacks have prevented the country from benefitting from the increase in oil price. Oil prices are denominated in dollars worldwide.
Nearly 2 million barrels of Canadian oil production will come back online in the next few weeks, while many traders believe that the 90% surge in crude oil prices over the past few months will serve to boost the level of supply.
Wildfires in Canada’s oil sands also contributed to the almost 4 million barrels per day decrease in immediate production.
The price for immediate delivery on West Texas Intermediate crude oil, a benchmark for trading in the United States, was as high as $50.21 a barrel on Thursday. “That chance is thin”, analyst Aw said.
Furthermore, there is indication that the U.S. oil production is increasing, hinted from an increase in the USA rig count.
“Most of these outages are unlikely to last”, UBS analyst Giovanni Staunovo said, anticipating resumption of supply from those sources as well as higher production from the Organization of the Petroleum Exporting Countries.
They approached $25 a barrel in February due to policy decisions by Saudi Arabia and other power brokers in OPEC against cutting back production as they sought to preserve market share at any price.
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“Crude oil prices have failed to hold above the Dollars 50 level due to concerns that higher prices could unlock more supply”, he said.
