Crude hit fresh 2016 highs in its march toward $50 in Asia on Wednesday, fanned by escalating wildfires in Canada’s oil sands region and hopes of an easing in the oversupply.
Prices have shot up after US banking giant Goldman Sachs this week said that supply disruptions in Africa’s biggest oil producer Nigeria — along with better demand — had created a surprising short-term supply deficit.
It described the situation in Nigeria as “systemic” and production in that country is likely to remain curtailed for the rest of the year.
At about 0930 IST, US benchmark West Texas Intermediate (WTI) for June delivery rose 14 cents, or 0.29 per cent, to $48.45 a barrel. Brent for July delivery climbed eight cents, or 0.16 per cent to $49.36.
Both contracts closed higher yesterday, with the WTI settling at $48.31, its highest since early October.
IG Markets analyst Bernard Aw said traders are feeling “more bullish” following the Goldman Sachs report.
“Based on the report, the demand has started to outstrip supply. Sentiment is picking up quite a bit and perhaps prices may push above the $50 mark in the next couple of weeks provided the dollar does not strengthen further,” he told AFP.
“Traders think that the situation in Canada might persist longer than expected. If the wildfires damage infrastructure, this may delay production even longer,” he added.
The blazes around the oil sands hub of Fort McMurray in Alberta, Canada have escalated, with about 8,000 workers ordered evacuated overnight.
Some 100,000 residents and oil workers had already been evacuated from Fort McMurray and its surroundings two weeks ago. According to the Conference Board of Canada, oil production was reduced by 1.2 million barrels per day on average.
In Nigeria, a major trade union yesterday vowed to defy a court injunction and press ahead with a national strike to protest government rises in petrol prices.
This follows several arrests by troops after armed attacks on an offshore oil facility.
Traders are also waiting for the release later today of a report on US commercial crude inventories, a closely-watched gauge for demand in the world’s top oil consumer.