Crude oil prices rallied to the highest level in 2016 this week on drop in inventories and strong imports by China aided positive trading sentiment amid ongoing supply outages in Nigeria.
Oil prices fell on Friday, as a stronger dollar pulled crude off the 2016 highs hit this week, although strong refinery demand and global supply disruptions lent some support.
International Brent crude oil futures were trading at $51.45 per barrel at 0655 GMT, down 80 cents, or around 1 per cent, from their last settlement. US West Texas Intermediate (WTI) futures were down 57 cents at $49.99 a barrel.
Here are five things you should know about rising crude oil prices:
1) During this calendar year, crude oil prices surged 88 per cent from its lows of $27.88 a barrel on January 20, 2016 to $52.51 dollars on June 8, 2016.
2) According to market experts, the rally in oil prices is a combination of factors arising out of increased optimism that prices may have bottomed out, unsustainability of oil producers at low prices, good economic data from the United States and cut in exploration and capex costs by oil companies.
3) The International Energy Agency, an energy watchdog for the Western world, said non-OPEC production would fall the most this year in a generation. IEA chief Fatih Birol said low oil prices had cut investment by about 40 per cent in the past two years, with sharp falls in the US, Canada, Latin America and Russia.
4) OPEC also said between 2016 and 2018, the industry is expected to invest around $40 billion per year in exploration, less than half its investments during 2012 to 2014. Meanwhile, credit rating agency Moody’s has also warned of sustainability of oil producing companies on account of low oil prices.
5) Outlook: Prathamesh Mallya, senior research analyst, non-agri commodities, Angel Commodities Broking believes further rally in oil prices in the second half of 2016. He said, “WTI Oil can move higher towards $65 per barrel while Brent can touch $70 in the next few quarters.”