The immediate catalyst appears to be a combination of inventory draw-downs in US crude, continued US production cuts, and further supply disruptions (Nigeria specifically), none of which scream demand or growth is going to make a dent in the glut.
July WTI tops $50.
“The immediate driver is a good draw on U.S. crude stockpiles, helping to nudge the price up a bit further,” says Ric Spooner, chief analyst at CMC Markets in Sydney.
“The market hasn’t had any bad news to knock it off its perch but the price is likely to struggle if it gets into the $50s. There is still quite a bit of inventory around”
With July WTI back at its highest since 11/5/15.
As Bloomberg notes, other factors seen driving prices higher include:
- Canada wildfires said to cut 1m b/d or more of oil sands output; output still returning
- Nigeria oil output slumps to 20-yr low amid series of attacks
- Venezuela has difficulties maintaining output amid power cuts, restriction of field services and theft
- U.S. active oil rig count shrinks to least since Oct. 2009
- IEA raises 2016 world oil demand fcast by 100k b/d to 95.9m b/d, non-OPEC supply to drop 800k b/d to 56.8m; “global supply surplus of oil will shrink dramatically later this year”
But we note that while everyone celebrates the recent rally, the curve has actually flattened notably since Nov 2015.
And we are getting an awful case of deja vu again.
This article is brought to you courtesy of Tyler Durden From Zero Hedge.