Oil prices were trading near 2016 highs on Wednesday, as supply disruptions and output cuts continued to tighten the market, although traders cautioned that high global crude inventories were still weighing on markets.
International Brent crude futures were trading at $49.31 per barrel at 0047 GMT, 3 cents above their last settlement, while U.S. West Texas Intermediate crude futures were unchanged at $48.31 a barrel.
Both contracts remained near their 2016 highs of $49.75 and $48.76 per barrel, respectively, hit during intra-day trading the previous day.
“With oil continuing to suffer from supply disruptions… EIA inventory data will be key to price action. Any further decline in stockpiles could see oil’s run higher continue,” ANZ bank said.
The U.S. Energy Information Administration (EIA) is scheduled to release official storage data later on Wednesday.
“With wildfires shifting back towards oil sands operations, the risk of supply disruptions extending into June has increased substantially. Combined with further falls in exports from Nigeria, the physical market is particularly tight,” ANZ added.
The oil industry is also keeping an eye on Venezuela, where economic and political turmoil is threatening oil production.
“Supply outages, when set alongside concerns over Venezuelan supply (due to insufficient funds to pay oil companies or spend on the maintenance of loading terminals), represents a significant amount of oil lost in the short-term, which in turn is reflected in firm time spreads at the front of the curve,” BNP Paribas said.
Despite the disruptions, BNP Paribas said that there was still a large storage overhang that would have to be reduced before the market could swing back into balance.
The bank even said that global crude inventories were still edging up despite the supply disruptions, implying that there is still more oil being produced than consumed.