Oil futures settled higher for a second straight session on Tuesday, with continued output disruptions in Nigeria and signs of a pickup in global demand helping to lift U.S. prices to their highest finish since late July. July West Texas Intermediate crude rose 67 cents, or 1.4%, to settle at $50.36 a barrel on the New York Mercantile Exchange. Prices haven’t settled at a level this high since July 21.
Continued output disruptions in Nigeria, signs of a pickup in global demand, and a U.S. dollar that has weakened in the wake of dovish comments from Federal Reserve Chairwoman Janet Yellen on Monday, are among the main catalysts for crude’s continued climb, said Fawad Razaqzada, technical analyst at Forex.com and City Index.
“The main reason for oil’s move is expectations of a tighter market in the second half of the year,” Razaqzada said. He also pointed to a boost in appetite for crude that has been quietly underpinning recent gains. “People are so focused on the supply side that they forget the demand side of the equation [in crude oil],” said Razaqzada.
He estimates that WTI could hit $55 a barrel, while Brent could reach around $56. WTI crude is up more than 90% since hitting a low on Feb. 11, while Brent has gained 70% over the same period.
Supply concerns in Nigeria have persisted as a militant group calling itself the Niger Delta Avengers, which has been bombing pipelines in the region, vowed on its purported Twitter account to reduce the country’s production to zero.
Commerzbank’s commodities research team estimated that production of Nigeria’s equivalent of Brent crude, “has decreased by 170,000 barrels per day because of the attacks.”