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| An oil drilling platform |
(Reuters) Oil prices hit six-month highs on Monday on worries about
supply outages in Nigeria and Venezuela and as long-time bear Goldman
Sachs sounded more positive on the market, although a stockpile build at
the U.S. storage hub for crude futures pared gains.
Crude futures have rallied for most of the past two weeks from a
combination of non-OPEC supply outages, declining U.S. production and
virtually frozen inflows of Canadian crude after wildfires in Alberta’s
oil sands region.
Nigeria’s oil output has fallen by 800,000 barrels a day to
1.4million barrels, its lowest in decades after several acts of
sabotage,oil minister, Ibe Kachikwu said today.
In the Americas, U.S. officials warned they were increasingly
concerned by the possibility of an economic and political meltdown in
Venezuela amid low oil prices, where crude production has also been
falling due to power shortages. The disruptions triggered a U-turn in the outlook for the oil market
from Goldman Sachs, which had long warned of global storage hitting
capacity and of another oil price crash to as low as $20 per barrel.
“The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” Goldman said. “The market likely shifted into deficit in May … driven by both
sustained strong demand as well as sharply declining production,” the
investment bank said. Brent crude futures were up $1.10, or 2.3 percent, at $48.93 per
barrel by 11:20 a.m. EDT (1520 GMT). It was just 53 cents short of
reaching $50 a barrel at the session high.
U.S. crude’s West Texas Intermediate (WTI) futures rose by $1.30, or 2.8 percent, at $47.51. Crude futures pared gains after Genscape’s report of a stockpile
build of 694,176 barrels at the Cushing, Oklahoma delivery point for WTI
futures, cited by traders. “Considering that Canada production was down 1 million barrels per
day (bpd) last week, it quite a surprise at all that we saw a build in
Cushing,” said a trader.
Supply disruptions have most likely pushed oil production below
consumption levels in May for the first time in at least two years,
meaning the world has started eating into the huge stockpiles that
erased 70 percent off prices between 2014 and early 2016. While Goldman sounded more positive on the market than before, it
also cautioned that at around $50 a barrel, supply could flip back into a
surplus in the first half of 2017 if exploration and production
activity picked up later this year. U.S. output C-OUT-T-EIA has dropped to 8.8 million bpd, 8.4 percent
below 2015 peaks as the sector suffers a wave of bankruptcies.
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