Oil prices climbed above $50 a barrel on Thursday for the first time in nearly seven months as a global glut that has plagued the market for nearly two years showed signs of easing.
Prices have rallied in recent weeks after a string of outages – due mainly to wildfires in Canada and unrest in Nigeria and Libya – knocked out nearly four million barrels per day of production. Prices slipped back below $50 in later trading.
Above $50 a barrel, oil was seen by many market players as breaching a psychological barrier that could lead producers to revive operations.
Global benchmark Brent crude oil went as high as $50.71, the highest in nearly seven months, after a larger-than-expected draw in US crude oil inventories last week indicated that buyers are starting to mop up spare supply.
"Certainly [$50] is a psychological barrier. There is a momentum, people will try and push it up over that," said Ric Spooner, chief market analyst at Sydney's CMC Markets.
A source at oil producer Chevron said on Thursday its activities in Nigeria had been "grounded" by a militant attack, worsening a situation that had already restricted supply.
A meeting of the Organisation of the Petroleum Exporting Countries (Opec) on June 2nd in Vienna to discuss the oil market added further support.
OPEC officials were more positive about market conditions ahead of next week’s gathering, sources said on Thursday, in a sign the exporter group is unlikely to change output policy.
However, the recent rise in oil prices and friction between Saudi Arabia and Iran mean the chances of a co-ordinated effort to support prices are slim.
“A [production] freeze remains a tail risk, but a very small one. The bigger risk is that following the meeting Saudi will increase production to meet rising summer domestic demand, to preserve market share in its oil wars with Iran and Iraq,” David Hufton, head of PVM Oil brokers, said.