Global oil benchmark, Brent crude, on Thursday traded above $50 per barrel for the first time in 2016 as supply disruptions and increased global demand continue to fuel a recovery.
Brent, against which Nigeria’s oil is priced, hit $50.14 per barrel at 8:30am, data from Energy Intelligence showed.
The rise followed US data on Thursday showing that oil inventories had fallen, largely due to supply disruptions following fires in Canada.
Brent crude has now risen 80 per cent since it hit 13-year lows of below $28 per barrel in January this year.
The difference between the global benchmark and Nigeria’s budget benchmark has now risen a little above $12 per barrel. But the recent disruptions to oil output occasioned by militant attacks have prevented the country from benefitting from the increase in oil price.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had recently said the nation’s oil output had dropped to 1.4 million barrels per day from 2.2 million bpd.
US crude oil inventories fell by 4.2 million barrels to 537.1 million barrels in the week to May 20, according to US Department of Energy data, the BBC reported.
Canada is the biggest supplier to the US and wildfires in the western provinces have knocked out about a million barrels a day.
Talks in recent months between the Organisation of Petroleum Exporting Countries and Russia about freezing oil production had already helped prices recover.
Short-term disruptions to oil supplies have also lifted the price, as they have offset higher production from Iran and Saudi Arabia.
As well as the disruption to key oil production facilities in Canada, attacks by militant groups continue to restrict oil pipelines in Nigeria.
Demand has also been better than expected from major economies such as China, India and Russia.
Against this improving backdrop, analysts are starting to modestly raise their forecasts.
Goldman Sachs said earlier this month that it now expected oil prices to consistently hit $50 a barrel in the second half of 2016 and $60 by the end of 2017.
The US bank said, “The oil market continues to deliver its share of surprises, with low prices driving disruptions in Nigeria, higher output in Iran and better demand.
“With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected.”