The worldwide price of crude oil on Thursday went above Dollars 50 a barrel for the first time in 2016 as supply disruptions and increased global demand continue to fuel recovery while the price of the Indian basket rose to USD 46.74 on the previous trading day.
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Wildfires in Canada’s oil sands also contributed to the almost 4 million barrels per day decrease in immediate production.
Oil at $50 is viewed as a level at which it makes economic sense for certain suppliers to start pumping again, CMC Markets (LSE: CMCX.L – news) trader Alex Wijaya told AFP.
Oil has topped $50 per barrel for the first time in seven months. In Nigeria, attacks by militants in Niger Delta region cut the country’s daily output by 800,000 barrels.
Data released by the U.S. Department of Energy on Wednesday showed that supplies in the country decreased by 4.2 million barrels, compared with an expectation of a 2.5 million barrel decline.
Prices have since rebounded, aided by the weeks of wildfires in Canada as well as unrest affecting energy infrastructure in Nigeria, Africa’s biggest oil exporter. Many market players believe the increased oil prices could lead producers, especially among shale companies in the United States, to revive operations that were closed in recent years.
Around 1115 GMT, US benchmark West Texas Intermediate for delivery in July was down 61 cents to $48.98 a barrel.
Another factor that could be attributed to the price fluctuations are talks between Russian Federation and the Organization of Petroleum Exporting Countries.
Short-term disruptions to oil supplies have also lifted the price, as they have offset higher production from Iran and Saudi Arabia.
“Shale is the new shock absorber to the market”, said Tony Nunan, oil risk manager at Tokyo’s Mitsubishi Corporation, said.
However, Mr Laird cautioned the price volatility was likely to continue.
Iran had so far rejected the call to freeze its output as unfair and emphasized that it will go ahead with its plans to increase its oil production.
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“The remarkable over 80% rally in oil since earlier this year may have been overdone, as the underlying macro conditions have not changed proportionally”, says IG Markets analyst Bernard Aw.
