Oil prices have now doubled from their 2016 lows, with Brent crude today topping $US52 per barrel and US crude, $US51 a barrel, driven by falling US stocks, supply disruptions in Nigeria and solid import figures from China for May.
In New York, West Texas Intermediate crude for July delivery rose 87 cents, or 1.7%, to settle at $US51.23 – the highest close for a nearby contract since July 15.
While in London, August Brent crude, rose $US1.07, or 2.1%, to finish at $US52.51 a barrel, its highest close since October.
The oil rebound helped Wall Street to end higher with the Dow and the S&P 500 ended the day at their best levels for over 10 months.
The Dow rose 0.4% to 18,005; the S&P 500 edged up by 0.3% to 2,119 and the Nasdaq was up 0.26% at 4,974.
Gold jumped by well over 1.4% to $US1,264 an ounce, meaning a solid day is ahead for local gold miners.
As a result the Aussie dollar is now closing in on 75 US cents and was trading about a quarter of a cent under that level in early Asian trading.
Oil investors had been concerned over fears of persistent over-supply and dwindling demand from China’s economic slowdown, – imports eased in May, but still stayed above 7 million barrels a day.
But supply disruptions from Nigeria to Canada, coupled with falling levels of US shale output and improved global demand have driven the rally from the lows just under $US27 a barrel in January and early February.
Nigeria has seen its output fall by 800,000 barrels a day to a two-decade low after being targeted by a militant group calling themselves the Niger Delta Avengers.
This group has vowed to shut the country’s oil operation. Attacks on key pipelines and associated facilities have reduced Nigeria’s daily oil output to around 1 million barrels a day.
The weekly inventories report from the Energy Information Administration said US crude stockpiles fell by 3.2 million barrels last week.
Meanwhile, data out of China showed that oil imports stayed strong in May (see China imports story).
While oil imports fell over May from April, due to planned refinery outages, they rose around sharply compared with the same month in 2015. Chinese oil imports in the first five months of the year, combined, were 16% up on the same period last year.
US production again fell as companies have curbed production. The Energy Information Administration said that domestic crude production in May averaged 8.7 million barrels a day, down about 1 million barrels a day from its peak in April last year.
But as prices rise above $US50, analysts warn that some US shale producers could start to increase their output. The number of rigs drilling for oil in the US rose by nine last week, the first increase in 11 weeks, Baker Hughes said last Friday in its weekly rig use report.
