Oil rises as supply disruptions soften supply glut

*Oil stockpile.

*Oil stockpile.

20 May 2016, London — Oil prices rose close to six-month highs on Friday as a series of supply outages in Nigeria, Canada and Libya tightened the global oversupply picture that has gripped the oil market for two years.

However, brimming crude storage sites across the world are preventing actual supply shortfalls and limiting sharper price gains, traders said.

Global benchmark Brent crude prices LCOc1 traded up 45 cents at $49.26 a barrel at 0844 GMT (0344 EDT), not far off a six-month high of $49.85 reached two days ago.

U.S. West Texas Intermediate (WTI) crude futures CLc1 traded at $48.59 a barrel, up 43 cents a day on day and within touching distance of a seven-month high of $48.95.

Unexpected supply disruptions across the world, excluding the output, falls in the United States, amount to around 2.5 million barrels of daily production, ANZ bank said.

In Nigeria, intruders blocked access on Thursday to Exxon Mobil’s (XOM.N) terminal exporting Qua Iboe, the country’s largest crude stream.

“Loading schedules have been interrupted at three of the five primary export terminals in Nigeria due to sabotage, with a fourth (Qua Iboe) interrupted by an operational incident; we estimate over 450,000 b/d is affected,” U.S. investment bank Jefferies said.

This means that the militant activity has cut Nigeria’s oil exports to a more than 22-year low of under 1.4 million b/d.

In Canada, production has also been cut as wildfires forced closures of around 1 million barrels in daily production, although output is gradually returning.

Libyan output has also been hit by an internal conflict.

However, other analysts said recent oil price gains were unsustainable.

“We feel that markets have moved too high, too far, too soon,” Harry Tchilinguirian, lead oil and commodities strategist at French bank BNP Paribas in London, told Reuters’ Global Oil Forum.

“The combination of a stronger dollar, still excess supply over demand and the ongoing overhang of inventories can be expected to put strong downward pressure on prices.”

He said oil prices could fall to the mid to high $30-a-barrel range.

*Karolin Schaps Henning Gloystein in Singapore, editing by William Hardy

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