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Oil Settles Above $50 for the First Time in 2016

June 7, 2016 at 19:10 by Andrew Moran

For the second consecutive trading session on Tuesday, oil futures continued their gains. Amid oil production disruptions in Nigeria, a weaker US dollar and a gradual increase in global demand, US oil prices settled above $50 for the first time since July.

July West Texas Intermediate (WTI) crude oil rose 1.50%, or $0.76, to $50.42 per barrel on the New York Mercantile Exchange at 18:13 GMT. The last time oil prices settled at this level was July 21.

August Brent crude was up 1.64%, or $0.65, at $51.20 a barrel at 17:13 GMT. Brent prices have not been this high since October 9.

Both WTI and Brent have nearly doubled in value since January 20, when they hit 13-year lows. Traders are mulling over the potential that the recent jump in oil prices could prompt many producers worldwide to increase their output capabilities.

Nigeria’s oil producers may be unable to take advantage of soaring prices in the short-term. The Niger Delta Avengers, the nation’s militant organization, has been regularly attacking oil pipelines in the region. The group recently announced on Twitter that its primary objective is to cut the country’s oil production to zero. The Nigerian government commenced talks with the rebel group on Tuesday in order to come up with a compromise.

The US Energy Information Administration (EIA) is forecasting that US oil demand will grow by 220,000 barrels per day (bpd) from its previous estimate of 140,000 bpd. According to the EIA, crude production declines for 2016 and 2017 will continue to be unchanged from May. It is projected that output will decrease by 830,000 bpd to 8.6 million bpd. By 2017, production will fall by 410,000 bpd to 8.19 million bpd.

It was reported last week that US drillers installed new rigs for only the second time this year, which shows a sign of recovering oil production in the US.

July gasoline prices, meanwhile, tumbled less than a penny to $1.583 per gallon.

If you have any questions and comments on the commodities today, use the form below to reply.

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