The price of Brent crude oil has topped US$50 per barrel – the first time the oil benchmark has achieved such a high this year, and the first time since November 2015.
Supply disruptions caused by a major wildfire in Canada and a rising global demand are the main causes of this surge.
Other reasons include recent talks between OPEC and Russia about stalling oil production, short-term disruptions in oil supplies which have offset production from Iran and Saudi Arabia and pipeline attacks in Nigeria, together with a rise in demand in China, India and Russia.
Brent Crude Oil Hits $50 A Barrel
According to the U.S. Department of Energy Information Administration, oil inventories have taken a hard hit following the wildfire in Canada, which caused a loss of around one million barrels per day.
Overall, there has been a decrease of 4.2 million barrels to 537.1 million barrels in the week ending on May 20.
This shows a 80% rise in Brent crude prices since it hit prices below US$28 per barrel in the beginning of 2016, a 13-year low.
More Optimism Across The Industry
Analysts are now starting to raise their forecasts to accommodate to the shy rise. Earlier this month analysts oil Alahdal A Hussein wrote an article for Offshore Post quashing the claims of corporates such as Morgan Stanley, who claimed the $50 mark wasn’t likely. Read it here
Goldman Sachs, who had suggested in September last year that oil prices could sink to US$20 per barrel, announced earlier this month that crude prices are now expected to hit US$50 in the second half of the year and US$60 by the end of next year.
Meanwhile, oil firms also seem to be anticipating a rise in crude prices, with BP budgeting for US$50 to US$55 per barrel in 2017.
This comes as a big change in forecasts if compared to earlier estimates. In the beginning of this year, for instance, the World Bank had estimated that the average spot price for crude would fall further this year to US$37 per barrel, while the International Monetary Fund (IMF) expected a similar decline.
However, earlier this month, the Economist Intelligence Unit (EIU) predicted a near rebalancing of the oil market.