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Oil hits 2016 high on U.S. draw forecasts, Nigeria worry

WORLD
By Reuters | June 7th 2016
Fuel prices are displayed at a Kazakh state-owned oil and gas company KazMunayGas gas station in Almaty, Kazakhstan, May 4, 2016.

USA/NIGERIA: Oil prices hit 2016 highs on Tuesday, with U.S. crude settling above $50 a barrel the first time in almost a year, on expectations of domestic stockpile draw and worries about global supply shortfalls from attacks on Nigeria's oil industry.

U.S. crude stockpiles likely fell by 2.7 million barrels last week to mark a third straight week of declines, an updated Reuters poll showed.[EIA/S]

Trade group American Petroleum Institute was expected to cite a drawdown as well in its inventory report due at 4:30 p.m. (2030 GMT), before official stockpiles data slated for Wednesday from the U.S. government.

Crude oil rallied in the past two sessions after rebels in Nigeria's Niger Delta vowed to halt output in the country, Africa's biggest producer until last year. The Nigerian government said it was initiating talks with the rebels.

"The market remains concerned about unscheduled supply interruptions with the latest coming from additional shut-ins in Nigeria," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

"With the industry projecting a decline in total U.S. crude oil stocks in this week's reports, the market bears are remaining on the sidelines."

U.S. crude's West Texas Intermediate (WTI) futures CLc1 settled up 67 cents, or 1.4 percent, at $50.36 a barrel. It was WTI's first settlement above $50 since July 2015. The session high was $50.53, a peak from October.

Brent crude futures LCOc1 settled up 89 cents, or 1.8 percent, at $51.44. It hit $51.53, also the highest since October.

Both Brent and WTI have almost doubled in value since winter, when they hit their lowest since 2003.

Prices bounced off those lows on talk of an OPEC production freeze, which did not materialize. The rally heightened after last month's wildfires in Canada's oil sands region and also has been supported by supply outages elsewhere, including Nigeria, Venezuela and Libya.

The U.S. Energy Information Administration said it expects crude production declines for 2016 and 2017 to remain unchanged from a month ago.

Production will fall by 830,000 bpd this year to 8.6 million bpd, and drop next year by 410,000 bpd to 8.19 million bpd, the agency said in its short-term energy outlook.

The EIA also raised its 2016 U.S. oil demand growth forecast.

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