Six-month high for oil as market heads into deficit

Oil rose to a six-month high Tuesday as Goldman Sachs Group Inc. said the market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand.

Futures climbed 3.3 per cent in New York. The shift to a supply deficit this month came one quarter earlier than forecast, Goldman Sachs said in a report. The bank raised its price forecasts, while projecting a return to surplus early next year. Militant attacks and pipeline outages have cut Nigerian volumes by at least 30 per cent, its petroleum minister said last week.

“There are a lot of disruptions out there and as a result crude production is down,” said Michael Wittner, the New Yorkbased head of oil-market research at Societe Generale SA.

“Nigeria is the big one right now. There are also disruptions in Libya, Venezuela and a number of other places.”

After falling to a 12-year low in February, oil has rebounded on signs the global glut will ease amid production cuts.

The supply surplus in the first half of this year is proving to be smaller than estimated, the International Energy Agency said last week, citing robust demand in India and other emerging nations.

Morgan Stanley, Barclays Plc and Bank of America Corp. joined Goldman Sachs in noting that supply losses are leading markets to rebalance.

West Texas Intermediate for June delivery rose US$1.51 to settle at US$47.72 a barrel on the New York Mercantile Exchange.

It’s the highest close since Nov. 3.

Prices have climbed more than 80 per cent from this year’s low.

Brent for July settlement rose US$1.14, or 2.4 per cent, to US$48.97 a barrel on the London-based ICE Futures Europe exchange. The contract also closed at the highest level since Nov. 3.

The global benchmark crude ended the session at a 55 cent premium to July WTI.

The global oil market will return to balance in the third quarter, Daniel Yergin, vice-chairman of industry consultants IHS Inc., said on Bloomberg Television. Crude will probably trade around US$50 in the second half of 2016, he said.