News

Oil prices rise

Oil prices have reached a six-month high following worldwide supply disruptions.

Brent Crude futures jumped 2.5% on Monday, trading at $49.05 per barrel, the highest price since November 2015. The increase is widely attributed to supply disruptions, causing worldwide production to fall below consumption for the first time in at least two years (1).

In May, global supply has been disrupted by as much as 3.75m barrels per day (2). In Nigeria, output has hit decade lows following several acts of sabotage. In the United States, crude production is 8.4% below 2015 peaks, as the sector suffers a wave of bankruptcies (1).

The deficit in oil production comes after a two-year period of oversupply and a global glut, as inventories of crude oil around the world stand near record highs (3).

Having previously predicted that oil prices could fall to as little as $20 a barrel due to global over-supply, Goldman has tempered its bearish forecast and raised its short-term price outlook (2).

“The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” Goldman stated (2).

Goldman, one of the most active banks in commodities, predict that the deficit will continue for the second half of 2016. However, if prices rise to $50 a barrel, exploration and production activity will pick up and contribute to a return to surplus in 2017 (1).

  1. (1) – Oil hits six-month highs on supply outages, Goldman forecast – Reuters
  2. (2) – Oil price ultra-bear Goldman Sachs turns mildly bullish – CNBC
  3. (3) – U.S. Oil Prices Settle at 2016 High – The Wall Street Journal