Oil prices were sharply higher in North American trade on Monday, adding to strong overnight gains, after Goldman Sachs (NYSE:GS) said the market shifted into deficit in May due to falling production, while a disruption to supplies in Nigeria provided further support.
On the ICE Futures Exchange in London, Brent oil for July delivery rose to a session peak of $49.38 a barrel, a level not seen since November 4, before giving back some gains to trade at $49.34 by 13:41GMT, or 9:41AM ET, up $1.51, or 3.16%.
“The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” Goldman wrote in a note on Monday, adding that the market “likely shifted into deficit in May … driven by both sustained strong demand as well as sharply declining production.”
The U.S.-based investment bank raised its oil-price forecast for the second half of the year to $50 from a March estimate of $45.
Last week, London-traded Brent futures rose $2.46, or 5.14%, amid reports of a militant attack on a Chevron-operated offshore oil facility in Nigeria’s oil-rich Niger Delta region.
Output from Africa’s largest oil producer has fallen to 1.65 million barrels per day (bpd) due to militant attacks, Finance Minister Kemi Adeosun said, from 2.2 million bpd.
Brent futures prices are up by roughly 75% since briefly dropping below $30 a barrel in mid-February, despite the collapse of talks at a Doha summit in April aimed at achieving a production freeze among OPEC and Non-OPEC producers. OPEC meets on June 2 in Vienna and may discuss the freeze initiative again.
Elsewhere, crude oil for June delivery on the New York Mercantile Exchange surged $1.50, or 3.25%, to trade at $47.71 a barrel, after hitting an intraday high of $47.75, the most since November 4.
New York-traded oil futures added $1.55, or 3.35%, last week, as falling crude stockpiles and an ongoing decline in U.S. shale production boosted sentiment.
Nymex oil prices are up nearly 70% since falling to 13-year lows at $26.05 on February 11.
Meanwhile, Brent’s premium to the WTI crude contract stood at $1.63 a barrel, compared to a gap of $1.62 by close of trade on Friday.