Crude oil price breaks US$50 mark for first time in 2016
BRENT crude passed US$50 a barrel for the first time this year yesterday after data showed a fall in US crude inventories, adding to expectations of a tightening global market.
At around 0330 GMT, Brent North Sea crude for July delivery was up 33 US cents at US$50.07 a barrel while US benchmark West Texas Intermediate was trading 29 US cents higher at US$49.85.
The US$50 price point is a key level and traders are watching to see if it can be sustained.
The gains came as markets digested news that US commercial crude oil inventories fell by 4.2 million barrels in the week to May 20, according to US Department of Energy data.
This is largely due to wildfires in the western provinces of Canada - the biggest supplier of crude to the US market.
Both pricing standards have been edging close to the US$50 mark for a fortnight but a strong US dollar had curtailed gains.
A firmer greenback, which has been performing stronger against major currencies, makes dollar-priced commodities like oil more expensive, hampering demand.
Some analysts are sceptical about how long the current prices will hold.
Aside from the stronger dollar, major exporter Iran has also vowed to keep up oil production after the lifting of Western sanctions in January, further fuelling the supply glut.
"The remarkable over 80 per cent rally in oil since earlier this year may have been overdone, as the underlying macro conditions have not changed proportionally," IG Markets analyst Bernard Aw said.
The global oil market nosedived from above US$100 a barrel two years ago to around US$27 earlier this year, plagued by a stubborn glut.