U.S. crude prices hits seven-month high as inventory drop seen

Tue May 17, 2016 4:56pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices rose for a second straight day on Tuesday, with U.S. futures hitting seven-month highs, on expectations of a drawdown in U.S. crude stockpiles and a new wildfire threat on Canadian oil supplies.

Concerns about the potential for higher Libyan output and apprehension that the market was reaching overbought levels initially restrained the rally.

Prices rose after a Reuters poll of oil analysts forecast U.S. crude inventories likely fell 2.8 million barrels last week, declining for a second straight week. [EIA/S]

Sentiment was also boosted by reports of fresh trouble for Canadian energy producers as a massive wildfire around the oil sands hub of Fort McMurray, Alberta, shifted north, forcing the evacuation of about 4,000 people from work camps.

Prices softened after a deal struck in Vienna between rival Libyan oil factions indicated the first step towards restoring crude production mostly shut in the North African country. The Libyan agreement followed Monday's news of potential reopening for some shuttered Nigerian output.

But in post-settlement trade, U.S. crude's West Texas Intermediate (WTI) futures rallied anew, reaching mid-October highs, as bulls pushed closer to the $50-a-barrel target.

WTI finished up 59 cents, or 1 percent, at $48.31 a barrel. The session high was $48.42 while the post-settlement peak was $48.76.

Brent crude closed up 31 cents at $49.28, hitting a six-month high of $49.58. In after-hours trade, it got to $49.75.   Continued...

A worker grabs a nozzle at a petrol station in Tehran, Iran January 25, 2016. REUTERS/Raheb Homavandi/TIMA