BRENT oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months as a global supply glut that plagued the market for nearly two years showed signs of easing.
Oil prices have rallied in recent weeks after a string of outages, due mainly to wildfires in Canada and unrest in Nigeria and Libya, knocked out nearly 4 million barrels per day of production.
Above $50 a barrel, oil was seen by many market players as breaching a psychological barrier that could lead producers, particularly among U.S. shale companies, to revive operations scrapped in recent years.
Global benchmark Brent crude oil LCOc1 was up 36 cents at $50.10 a barrel at 1110 GMT, the highest in nearly 7 months, after a larger-than-expected draw in U.S. crude oil inventories last week indicated buyers are starting to mop up spare supply.[EIA/S]
U.S. crude futures CLc1 were up 29 cents at $49.85 a barrel, after touching $49.97, the highest since mid-October.
“Certainly ($50) is a psychological barrier. There is a momentum, people will try and push it up over that,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
A source at oil producer Chevron said on Thursday its activities in Nigeria had been “grounded” by a militant attack, worsening a situation that had already restricted the supply of hundreds of thousands of barrels.
A meeting of the Organization of the Petroleum Exporting Countries on June 2 in Vienna to discuss the oil market added further support.
However, the recent rise in oil prices and friction between key members Saudi Arabia and Iran mean a coordinated effort to intervene to support prices is slim.
“A (production) freeze remains a tail risk, but a very small one. The bigger risk is that following the meeting Saudi will increase production to meet rising summer domestic demand, to preserve market share in its oil wars with Iran and Iraq,” David Hufton, head of PVM Oil brokers, said.
“These are all compelling reasons to expect Saudi production to rise over the summer months.”