The global oil benchmark, Brent crude, extended its gains on Tuesday, trading above the $50 per barrel mark for the first time since October last year.
The further rise in Brent comes as expectations the United States’ crude draws underpinned a market already worried about potential supply shortages from attacks on Nigeria’s oil industry. It hit $50 per barrel for the first time in 2016 on May 26.
The US crude stockpiles likely fell by 3.5 million barrels last week to mark a third straight week of declines, a preliminary Reuters poll showed.
Crude oil rallied in the past two sessions after militants in the Niger Delta vowed to halt output in Nigeria, which until last year was Africa’s top oil producer turning out about two million barrels per day.
“The market remains concerned about unscheduled supply interruptions with the latest coming from additional shut-ins in Nigeria,” a Senior Partner at the Energy Management Institute in New York, Dominick Chirichella, said.
“With the industry projecting a decline in total US crude oil stocks in this week’s reports, the market bears are remaining on the sidelines,” Chirichella added.
Brent, against which Nigeria’s oil is priced, was up by 55 cents at $51.08 at 6:20pm, after rising to $51.30 earlier, its highest level since October.
US crude’s West Texas Intermediate gained 40 cents to $50.09 per barrel, having touched a fresh 2016 peak of $50.37 earlier.
Both Brent and WTI have almost doubled in value since winter, when they hit their lowest since 2003.
Prices began recovering since end of February on talks of a production freeze by the Organisation of Petroleum Exporting Countries, which, however, did not materialise.
The rally heightened after last month’s wildfires in Canada’s oil sands region and also has been supported by supply outages elsewhere, including Nigeria, Venezuela and Libya.
The Chief Commodities Analyst at SEB, Bjarne Schieldrop, highlighted the positive impact on prices of further disruptions to crude supplies from Nigeria.
He said, “Nigeria’s crude is light and sweet, and of a comparable quality to Brent crude. It is also geographically close to where Brent crude is priced.
“For now, we expect the oil price to continue higher. Lost supply in Nigeria is likely to fluctuate, but the political and social nature of the problem calls for continued outages.”
Royal Dutch Shell Plc has said it won’t attempt to repair a key pipeline in Nigeria for now after militants attacked it a second time last week, according to Bloomberg.
Shell’s Chief Financial Officer, Simon Henry, was quoted to have said that the company had to withdraw repair crews last week after a second attack against the 48-inch Forcados export pipeline.
The pipe links storage tanks onshore with an offshore port. Shell’s resignation over the disabled pipeline suggests a new level of insecurity as a wave of violence hits the oil-rich Niger Delta, leaving the country’s production at its lowest level in nearly three decades.
The US Energy Information Administration, in its short-term energy outlook, said production would fall by 830,000bpd this year to 8.6 million bpd, while it would drop next year by 410,000bpd to 8.19 million bpd.
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