Oil hits six-month highs on supply outages, Goldman forecast

Mon May 16, 2016 3:36pm EDT
 
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By Barani Krishnan and Dmitry Zhdannikov

NEW YORK/LONDON (Reuters) - Oil prices hit six-month highs on Monday on worries about global supply outages and as long-time bear Goldman Sachs sounded more positive on the market, although a stockpile build at the U.S. storage hub for crude futures limited gains.

Expectations of resumption in oil exports from a Libyan port, a ramp up in Nigerian crude production by Exxon Mobil Corp and an improved oil-for-loans deal reached by Venezuela with China furthered the tempered the bullish theme in oil.

Brent crude futures settled up $1.14, or 2.4 percent, at $48.97 per barrel. It rallied to $49.47 earlier, its highest since early November, in a test towards $50.

U.S. crude's West Texas Intermediate (WTI) futures rose by $1.51, or 3.3 percent, to end at $47.72 after touching a six-month high at $47.85. WTI saw a flurry of late buying, with more than 13,600 lots changing hands in the final minute, according to Reuters data, in an attempt to test $48.

Crude futures have rallied for most of the past two weeks from a combination of Nigerian, Venezuelan and other outages, declining U.S. production and virtually frozen inflows of Canadian crude after wildfires in Alberta's oil sands region.

The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs, which had long warned of global storage hitting capacity and of 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," said Goldman, which added that supply likely shifted into a deficit in May.

But some of Monday's bullish sentiment took a back seat when market intelligence firm Genscape reported a stockpile build of 694,176 barrels at the Cushing, Oklahoma delivery point for WTI futures. The build surprised some market participants expecting a stock decline in Cushing due to the shuttered Canadian output.   Continued...

A worker grabs a nozzle at a PTT gas station in Bangkok, Thailand, January 5, 2016.   REUTERS/Athit Perawongmetha