Brent crude passed $ 50 a barrel for the first time in 2016 in Asia Thursday after data showed a fall in US crude inventories, adding to expectations of a tightening global market.
At around 0220 GMT, Brent North Sea crude for July delivery was up 27 cents at $ 50.01 a barrel while US benchmark West Texas Intermediate (WTI) was trading 21 cents higher at $ 49.77.
Both commodities had been edging close to the $ 50 mark for a fortnight but a strong US dollar had curtailed gains.
The greenback, which has been performing stronger against all major currencies, makes dollar-priced commodities like oil more expensive, curtailing demand.
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But prices edged past the $ 50 mark in early Asian trading as the market digested news that US commercial crude oil inventories fell by 4.2 million barrels in the week to May 20, according to the Department of Energy in its weekly report.
This is largely due to wildfires in the western provinces of Canada — the biggest supplier of crude to the US market — which have curbed oil production.
The global oil market nosedived from above $ 100 a barrel two years ago to around $ 27 in early 2016, plagued by a stubborn glut.
They have since rebounded, aided by the weeks of wildfires in Canada as well as unrest affecting energy infrastructure in Nigeria, Africa’s biggest oil exporter.
But some analysts are sceptical about how long such prices will hold.
“The remarkable over 80 percent rally in oil since earlier this year may have been overdone, as the underlying macro conditions have not changed proportionally,” wrote IG Markets analyst Bernard Aw in a client note.
“This suggested that speculative trades have driven up the price these months, and may not be sustainable.”
Major exporter Iran has also vowed to keep up oil production after the lifting of Western sanctions in January, further fuelling the supply glut.
