Oil Price Climbs 2016 High Buoyed By Plunging Supply, Feeble Dollar

 

Oil prices soared to their highest in eight months on Tuesday, June 7, driven buoyed by the dollar nearing one-month lows and by declining Nigerian oil output.

Brent crude futures were up 36 cents on the day at $50.91 a barrel by 1339 GMT, having hit an intraday peak of $51.30 earlier in the day, their highest since October.

U.S. crude oil futures gained 32 cents to trade at $50.01 a barrel, having touched a fresh 2016 peak of $50.37, their highest since October last year.

The price of oil has nearly doubled since January, when it hit its lowest since late 2003, boosted largely by a spate of unforeseen outages that have eroded production in Canada, Venezuela, Libya and Nigeria, along with a steady decline in higher-cost U.S. shale output.

Yet analysts say the rally may entice some shale production back online, potentially damaging the prospects for a more sustained price rise.

“I think that is a bit of a risk right now,” Petromatrix analyst Olivier Jakob said.

“Last year, there was also a rally into June and that came to an end when the U.S. rig count started to increase … if we have another increase this week and another next week, then it will be harder to sustain the rally because there will be a perception that we’re back to production economics,” he said.

Market watchers are bracing for signs of a pick-up in U.S. oil production after weekly data from Baker Hughes showed U.S. drillers added rigs for only the second time this year, analysts said.

 

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