Oil prices hit above $50 for first time in seven months

Offshore staff

LONDON Brent oil prices climbed above $50/bbl on Thursday for the first time in nearly seven months, according to a Reuters report.

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 MMb/d of production.

According to the report, above $50/bbl oil was seen by many market players as breaching a psychological barrier that could lead producers, particularly among US shale companies, to revive operations scrapped in recent years.

Global benchmark Brent crude oil was up $.36 at $50.10/bbl, the highest in nearly seven months, after a larger-than-expected draw in US crude oil inventories last week indicated buyers are starting to mop up spare supply, Reuters reported.

US crude futures were up $.29 at $49.85/bbl, 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,”Ric Spooner, chief market analyst at Sydney’s CMC Markets, was quoted as saying.

A meeting of OPEC 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, was quoted as saying.

“These are all compelling reasons to expect Saudi production to rise over the summer months.”


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