Oil prices held above $50 a barrel on Wednesday following a 3% jump a day earlier on the back of Brazilian and Libyan supply worries, a US pipeline outage and a general rally in riskier assets on hopes of more economic stimulus measures.
Brent and US futures for December delivery rose slightly to $50.70 and $48.09 respectively. Brent ended the last session $1.75, or 3.6%, higher while US crude rose $1.76, or 3.8% on Tuesday, Reuters reported.
US crude hit its highest since Oct. 13 during Tuesday’s session after the US Colonial Pipeline suspended operations due to flooding, on outage that came on top of a strike at Brazil’s state oil producer Petrobras and the closure of the Libyan oil export terminal.
The Petrobras strike has slowed daily oil output by about 25% in the world’s ninth biggest oil producer.
“While a few days of even 500,000 barrels per day of lost supply are clearly not an issue, a sustained outage of this magnitude heading into December when refinery runs reach a seasonal high could be a reasonably bullish factor,” JBC Energy analysts said in a note.
Longer term, oil prices are expected to recover as low oil prices are hurting the US shale boom, thus helping the market to rebalance despite record high production volumes from the Organization of the Petroleum Exporting Countries.
“The market will rebalance ... Most people think oil will be back at $60-70 a barrel in the next couple of years,” Ian Taylor, chief executive at Vitol, the world’s largest oil trading company, told a conference in London.
Crude stocks rose by an estimated 2.8 million barrels in the week to Oct. 30 to 479.9 million, data from industry group the American Petroleum Institute showed on Tuesday.
