Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months, boosted after U.S. government figures showed a sharper-than-expected drawdown in crude stocks last week.
Brent had climbed 38 cents to $50.12 a barrel by 6:48 GMT, its highest since Nov. 4. It ended the previous session up $1.13, or 2.3%.
U.S. crude futures rose 33 cents to their strongest since Oct. 12 at $49.89 a barrel, after settling the last session 94 cents higher.
“Geopolitical issues in West Africa and the Middle East, supply outages, increased demand and maybe a touch of a weaker dollar have all helped push prices higher,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
“I don’t think the rally will last because prices will reach a level that will bring U.S. shale oil output back into the market,” he added.
U.S. crude stocks fell 4.2 million barrels to 537.1 million in the week to May 20, the steepest weekly drop in seven weeks, the U.S. Department of Energy’s Energy Information Administration said on Wednesday.
That was larger than analyst expectations of a 2.5 million-barrel fall, but not as much as the 5.1 million expected by trade group, the American Petroleum Institute.
Gasoline stocks rose 2 million barrels to 240.1 million barrels against forecasts of a 1.1 million-barrel drop, while gasoline demand over a four-week average rose 3.9% to 9.6 million barrels last week, the EIA said.
Ric Spooner, chief market analyst at Sydney’s CMC Markets, said the world was still oversupplied with oil even with increased demand and supply disruptions from Canadian wildfires and violence in Libya and Nigeria.
“Certainly ($50) is a psychological barrier. There is a momentum, people will try and push it up over that,” Spooner said.
“(From a) practical point of view will there or will there not be a sustainable increase above $50? At the $50-$55 range there has got to be a good chance of seeing the peak.”
BMI Research said in a report on Thursday that Indonesia, Malaysia and Vietnam would turn into net crude importers over the next five years as they, together with Brunei and Cambodia, add 500,000 barrels per day (b/d) of refining capacity over the next decade.