Oil futures rose for a second straight session on Tuesday, with U.S. crude hitting a seven-month high, as the market focused on supply disruptions that prompted long-time bear Goldman Sachs to issue a bullish assessment on near-term prices.
Crude oil prices have rallied for most of the past two weeks due to a combination of Nigerian, Venezuelan and other outages, declining U.S. output and curtailments of Canadian crude after fires in Alberta’s oil sands region.
U.S. West Texas Intermediate (WTI) futures were up 67 cents at $48.39 a barrel at 0635 GMT, the highest since October.
Brent crude futures were up 37 cents at $49.34 a barrel, near the six-month high of $49.47 reached on Monday.
Outages throughout May will average 3.2 million barrels per day (bpd), Energy Aspects analyst Amrita Sen said in a research note.
“The longer these outages, the quicker the pace of rebalancing,” Sen said.
“Although refining margins remain weak, we maintain our view that persistent crude stock draws (will) begin by end Q2 16,” she said.
The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs. The U.S. bank, which had long warned of global storage hitting capacity and of another oil price crash to as low as $20 a barrel, now sees U.S. crude trading as high as $50 in the second half of 2016.
A further bullish note was sounded by the U.S. Energy Information Administration (EIA) when it said shale oil output is expected to drop in June for an eighth consecutive month.
Shale output is expected to fall by nearly 113,000 bpd to 4.85 million bpd, as the nearly two-year slump in prices continues to undermine profitability for drillers, the EIA report released on Monday shows.
Oil prices were also drawing support from fires burning around the Canadian oil sands hub of Fort McMurray.
The fires were growing and moving rapidly north late on Monday, forcing firefighters to shift their focus to protecting major oil sand facilities north of the city, officials said.
A dozen work camps south of the major projects faced mandatory evacuation notices.