Oil near six-month high
as outages support
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[May 17, 2016]
By Alex Lawler
LONDON (Reuters) - Oil traded at around $49
a barrel on Tuesday within sight of a six-month high, supported by
supply outages in Nigeria, Canada and other producers that are eroding a
Prices eased from the highs after Libyan factions agreed in
principle to have one oil organization, potentially bringing higher
output a step closer. Also, traders were eyeing the restart soon of
some of the shut Nigerian output.
Brent crude traded at a six-month high of $49.47 intra-day and at
1018 GMT was down 7 cents at $48.90. U.S. crude was up 14 cents at
$47.86, having earlier reached $48.42, the highest since October.
"Globally, there are still a lot of supply disruptions and this
comes on top of natural declines," said Olivier Jakob, oil analyst
at Petromatrix. "It does bring forward the expected rebalancing in
the second half."
Beside unplanned outages, supply from non-OPEC countries is expected
by the International Energy Agency and other forecasters to fall
this year and output in some OPEC nations such as Venezuela is
suffering because of a cash crunch.
Profit-taking by some investors could be prompting some weakness in
prices on Tuesday, but further gains are likely given the supply
losses, Commerzbank said.
"I expect prices to take a shot at $50," said Carsten Fritsch,
analyst at Commerzbank. "The outages in Canada and Nigeria alone are
probably enough to leave the global oil market undersupplied at
Oil is still only half its level of mid-2014, when concern about
excess supply prompted prices to begin a decline from over $100, and
high inventories have limited the response of prices to the outages.
Still, the disruptions this week triggered a U-turn in the oil
market outlook of Goldman Sachs. The bank, which had been warning of
a risk of $20 oil, now sees U.S. crude trading as high as $50 in the
second half of 2016.
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Crude inventories in the United States, at a record high in April, are expected
to decline in weekly supply reports due later on Tuesday and on Wednesday, which
would support the view that excess supply is easing.
The first report, from industry group the American Petroleum Institute, is due
at 4:30 p.m. EDT (2030 GMT) on Tuesday.
Further support could come from lower output in the United States. U.S. shale
oil has been declining and is expected to fall in June for an eighth consecutive
month, according to a U.S. government forecast on Monday.
(Additional reporting by Aaron Sheldrick; Editing by Adrian Croft and David
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