The oil price moved closer to the $50-a-barrel mark for the first time since November, on growing supply disruptions in Nigeria and a more positive assessment of the market from Goldman Sachs, the most bearish of the leading commodity banks.
Militant threats to production in Nigeria, a key Opec producer, are the latest fillip for an oil price that has also benefited from a booming gasoline market and rising demand in India.
Anxiety over supply has also been fanned after Venezuelan president Nicolás Maduro on Friday announced plans to extend his government’s emergency powers — a reminder to investors of the deepening political instability in another oil producer.
Supply disruptions around the world are likely to average more than 3m barrels a day this month, with Nigerian output at its lowest level in decades. On Monday its oil minister said output had fallen by 800,000 barrels a day to 1.4m b/d.
“Developments in Nigeria and the increasingly tense situation in Venezuela . . . make a breach of the $50 this week a strong possibility,” said David Hufton of PVM, an oil brokerage.
Brent, the global benchmark for oil, jumped more than 3 per cent to $49.47, a six-month high. Meanwhile, West Texas Intermediate, the US benchmark, rose 3.2 per cent to $47.72.
The spectre of diminished supply and strengthening demand was enough to prompt analysts at Goldman Sachs, arguably the most influential bank in commodity markets, to lift their forecast for WTI. It now thinks the US benchmark will average $45 per barrel during the second quarter, up from an earlier estimate of $35 in March.
“The physical rebalancing of the oil market has finally started,” said Goldman analyst Damien Courvalin in a report. “We believe the market has likely shifted into deficit in May.”
Brent has rallied more than 75 per cent since hitting a low for the year in late January, helped by supply disruptions and a growing conviction among investors that the market will rebalance later this year as demand improves and high cost producers are forced to curb output.
Last week, the International Energy Agency, one of the world’s leading energy forecasters, said it was more likely to increase, rather than cut, its demand growth forecast because of the booming global gasoline market and India’s increasing thirst for crude.
Goldman raised its global demand forecast by 200,000 barrels to 1.4bn on Monday, citing strong demand in India.
But like many forecasters Goldman said it was still cautious on the outlook for oil, warning the market could move into surplus in the first quarter of 2017 because of rising supplies from low-cost Opec producers and fewer supply disruptions. The bank reckons oil could be trading at $45 a barrel in the first quarter of next year.
Hedge funds and other money managers are also growing more nervous on oil after the big rally from the January lows. Last week they cut their net long position in WTI and Brent — the difference between bets on rising and falling prices — by 18m barrels to 218m barrels.
“Supply is resilient and still growing, particularly with the return of supply from Iran,” said Adam Longson, analyst at Morgan Stanley. “The latest reports out of US producers are no better and suggest that US production is unlikely to fall as much as the current low-price environment would suggest.”
Additional reporting by Maggie Fick in Lagos
Get alerts on Oil when a new story is published