Oil prices rise on Nigerian outages,
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[May 16, 2016]
By Henning Gloystein and Dmitry Zhdannikov
SINGAPORE/LONDON (Reuters) - Oil prices
jumped over 2 percent on Monday to their highest since November 2015 on
growing Nigerian oil output disruptions and after long-time bear Goldman
Sachs said the market had ended almost two years of oversupply and
flipped to a deficit.
A worker grabs a nozzle at a
PTT gas station in Bangkok, Thailand, January 5, 2016. REUTERS/Athit
Brent crude futures were trading at $48.71 per barrel at 0836 GMT,
up 88 cents, or 1.8 percent, having risen earlier by as much as 2
U.S. crude futures were up 85 cents, or 1.8 percent, at $47.06 a
Supply disruptions around the world of as much as 3.75 million
barrels per day (bpd) have wiped out a glut that pulled down oil
prices by as much as 70 percent between 2014 and early 2016.
The disruptions triggered a U-turn in the outlook of Goldman Sachs,
which had long warned of global storage hitting capacity and of yet
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," it
However, Goldman cautioned that the market would flip back into a
surplus in the first half of 2017 as it said prices around $50 per
barrel in the second half of 2016 would see exploration and
production activity picking up.
In Nigeria, output has fallen to its lowest in decades at around
1.65 million bpd following several acts of sabotage.
In the Americas, U.S. officials warned they were growing
increasingly concerned by the possibility of an economic and
political meltdown in Venezuela amid low oil prices.
Venezuela's oil production has already fallen by at least 188,000
bpd this year.
In the United States, crude production has fallen to 8.8 million
bpd, 8.4 percent below 2015 peaks as the sector suffers a wave of
And in China, output fell 5.6 percent to 4.04 million bpd in April,
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Countering this, supply rose from the Organization of the Petroleum
Exporting Countries (OPEC) as its producers are engaged in a race
for market share.
OPEC pumped 32.44 million bpd in April, up 188,000 bpd from March,
the highest since at least 2008.
Also preventing steeper price jumps was a recovery in output in
Canada following closures due to a wildfire, as well as bloated
global crude storages.
"The inventory buffer may be preventing full price recovery and ...
the market is rightly nervous about the sustainability of outages,"
said Morgan Stanley.
Barclays said that "while the supply-side disruptions are supporting
oil market balances, refinery margins are starting to weaken,
especially in Asia," adding that weaker demand from those refiners
could produce "downside risk to prices in Q3 16."
(This story corrects to show prices highest since November, not
October 2015, in paragraph one)
(Reporting by Henning Gloystein and Dmitry Zhdannikov; Editing by
Joseph Radford, Richard Pullin and Adrian Croft)
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