Price of WTI oil jumps above $50 for this first time this year

Oil prices jumped Thursday above $50 for the first time this year as a long-lasting global supply glut shows increased signs of easing.

In a boost for countries exporting crude, including the likes of crisis-hit Venezuela, prices are once more on the rise having nosedived from above $100 a barrel two years ago to around $27 in early 2016.

Futures had slumped owing largely to a global supply glut, fed by rising production of oil extracted from North American shale rock that competed in the market place with crude from key producers including the OPEC cartel, Russia and Norway.

But in recent weeks, oil prices have rebounded on lower output caused by wildfires in Canada, as well as unrest in Nigeria, Africa’s biggest oil producer. Outages in Venezuela have also lent support.

On Thursday, benchmark oil contract Brent North Sea crude struck $50.36 a barrel — the first time above $50 and highest level since early November.

US contract West Texas Intermediate (WTI) hit $50.08 a barrel.

“Oil has broken through the $50 per barrel level for the first time in nearly seven months, supported by government data that illustrated steeper than expected drawdown in US crude oil stockpiles last week,” said analyst Dorian Lucas at energy consultancy Inenco.

Crude had been edging close to $50 for the last fortnight but a strong dollar caused by rising expectations of a US rate hike next month curtailed gains. A firmer greenback makes the dollar-priced commodity more expensive, hampering demand.

The tip finally above the psychological level came thanks to official data Wednesday that showed US commercial crude inventories fell by 4.2 million barrels last week, indicating strong demand in the world’s top oil consumer.

The Bank of Canada meanwhile said that the destruction by fire of homes and businesses and the halt to oil production would shave about 1.25 percentage points off the country’s gross domestic product in the second quarter.

“News about the US 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.

Around 1150 GMT, Brent oil for delivery in July stood at $50.35, up 61 cents from Wednesday’s close.

New York’s WTI crude for July rose 50 cents to $50.06 a barrel.

Shailaja Nair at global energy information provider Platts told AFP that it remained to be seen whether oil producers would find respite after prices breached the $50 mark.

“There’s a little bit of demand but not like suddenly we’ve found a huge pocket of demand, we are not seeing that. Whether it will stay above $50 or not, that is going to tell us whether the producers can breathe a sigh of relief,” she said.

Traders are eyeing next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna where a deal on reducing production may be reached.

But OPEC member Iran, which returned to world markets in January after the lifting of Western sanctions linked to its nuclear programme, has so far refused to curb production.

Tehran’s stance appeared to reinforce market doubts that OPEC would in fact take any firm action to curb oversupply.

Talks in Doha in April involving OPEC members and other major producers, including Russia, failed to reach a deal to cap production.

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