Oil hits $50 a barrel for first time this year

The price of oil has gone above $50 a barrel for the first
time in 2016 as supply disruptions and increased global
demand continue to fuel a recovery.
The benchmark Brent crude price hit $50.07 a barrel in
Asian trade.
The rise followed US data on Thursday showing that oil
inventories had fallen, largely due to supply disruptions
following fires in Canada.
Brent crude has now risen 80% since it hit 13-year lows of
below $28 a barrel at the start of the year.
US crude oil inventories fell by 4.2 million barrels to 537.1
million barrels in the week to May 20, according to US
Department of Energy data.
Canada is the biggest supplier to the US and wildfires in the
western provinces have knocked out about a million barrels
a day.
Talks in recent months between Opec and Russia about
freezing oil production had already helped prices recover.
Short-term disruptions to oil supplies have also lifted the
price, as they have offset higher production from Iran and
Saudi Arabia.
As well as the disruption to key oil production facilities in
Canada, attacks by militant groups continue to restrict oil
pipelines in Nigeria.
Demand has also been better than expected from major
economies such as China, India and Russia.
Against this improving backdrop, analysts are starting to
modestly raise their forecasts.
Goldman Sachs said earlier this month that it now expected
oil prices to consistently hit $50 a barrel in the second half
of 2016 and $60 by the end of 2017.
The US bank said: “The oil market continues to deliver its
share of surprises, with low prices driving disruptions in
Nigeria, higher output in Iran and better demand.
“With each of these shifts significant in magnitude, the oil
market has gone from nearing storage saturation to being in
deficit much earlier than we expected.”
In a sign of growing confidence, oil companies have also
started preparing for higher prices.
BP said last month it had budgeted for prices of at least
between $50 and $55 a barrel in 2017.
Also last month US oil producer Pioneer Natural Resources
announced plans to add up to 10 new rigs when the oil price
recovers to $50.
Adam Laird, an investment manager at Hargreaves
Lansdown, told the BBC: “This is an area that’s been starved
of resources and investment and that psychological barrier
[of $50] could be enough to make some executives
However, Mr Laird cautioned the price volatility was likely to
continue. “It’s too early to say this is the beginning of the big
rebound,” he said.
Abhishek Deshpande, an oil markets analyst at Natixis,
agreed and said: “We believe that the market is going up,
but if it goes too quickly there will be auto-corrections.”