US oil prices end above $50 for first time since July

INQUIRER FILE PHOTO

NEW YORK, United States — US oil prices finished above $50 a barrel for the first time since July on Tuesday as a tightening supply picture and a weaker dollar further boosted the key commodity.

Topping $50 marked a dramatic rebound from January and February, when crude was in  freefall to nearly $25, hitting lows not seen since 2003 and sending shockwaves through the oil industry, which has been forced into massive layoffs and numerous bankruptcies.

But the price was still far below the $100-plus level of just over two years ago, before the realization of a massive world glut and slowing economic growth tanked the world crude market.

READ: Brent crude surpasses $50 a barrel for first time this year | Divided OPEC to breathe easier with return of $50 oil

On Tuesday, the US benchmark West Texas Intermediate for July delivery rose 67 cents to $50.36 a barrel on the New York Mercantile Exchange, capping a rally from the low near $25 a barrel in February.

In London, Brent North Sea crude for delivery in August advanced 89 cents to $51.44 a barrel, hitting its 2016 peak for the second session in a row.

Oil prices have been on a general march higher since early April that accelerated last month on supply outages due to Canadian wildfires and disruptions engineered by Nigerian militants.

That has shifted the dynamics of a market that began falling from more than $100 a barrel in mid-2014 due to a surge in supplies in the United States, driven by the fracking revolution, and repeat decisions by the Organization of the Petroleum Exporting Countries against cutting output.

Nigeria production

Analysts said ongoing uncertainty about Nigeria’s production was strengthening the oil market.

Nigeria’s government and military chiefs met governors of oil-producing states after announcing it planned peace talks with militants who have repeatedly attacked pipelines and installations, slashing output.

Attacks have cut output to 1.6 million barrels per day, well below the 2.2 million barrels per day that were budgeted, heaping further pressure on an economy badly hit by the crude market meltdown.

“The loss of supply from Nigeria is highly important on several accounts,” said Bjarne Schieldrop, chief analyst at Commodities SEB Markets.

“For one, it of course helps to tighten up the market. Secondly, Nigeria’s crude is light and sweet and thus of a comparable quality to Brent crude.”

Analysts said oil was also boosted by a dip in the dollar against major currencies after Federal Reserve Chair Janet Yellen on Monday emphasized that interest rate increases would be gradual after Friday’s very weak jobs report. A weak dollar can boost demand for crude, which is sold on global markets in the US currency.

“A good portion of what we’re seeing during the last couple of days is a reaction to the anticipation the Fed will not change its interest rates and that’s leading to a weaker dollar,” said James Williams of WTRG Economics.