Oil prices stay close to 2016 highs on ebbing supply, softer dollar

Oil prices hit their highest in eight months on Tuesday, buoyed by the dollar nearing one-month lows and by falling Nigerian oil output after a spate of attacks on infrastructure.

Brent crude futures were up 67 cents on the day at $51.22 a barrel by 1135 GMT, having hit an intraday peak of $51.29 earlier in the day, their highest since October. US crude oil futures CLc1 rose 60 cents to $50.29 a barrel, having touched a fresh 2016 peak of $50.37, their highest since October last year.

“With Brent staying above $50, oil is on an upward momentum with the restart of French refineries that were shut on strikes and pipeline attacks in Nigeria,” said Kaname Gokon at brokerage Okato

Shoji in Tokyo. Preliminary work got under way on Monday to restart three of Total’s  French oil refineries, stopped as part of nationwide strikes.

Crude futures have nearly doubled since January when they hit their lowest since late 2003 buoyed by supply outages in Canada, Venezuela, Libya and Nigeria.

Nigeria’s Bonny Light crude output is down by an estimated 170,000 barrels per day (bpd) following attacks on pipeline infrastructure, according to one source.

Opec failed to agree on a clear oil output strategy last week, but traders said Saudi Arabia’s promise not to flood the market has provided support to oil.

Oil, along with the rest of the commodities complex, has also been supported by a weaker dollar.

Federal Reserve Chair Janet Yellen has indicated the US central bank will raise interest rates, but has not given a sense of when. US commercial crude oil inventories likely fell by 3.5 million barrels last week, marking a third straight weekly drop, a preliminary Reuters poll showed. The data by the American Petroleum Institute is due out at 2030 GMT.

Oil also received support after market intelligence firm Genscape reported a drawdown of 1.08 million barrels at the Cushing, Oklahoma, delivery point for WTI crude futures last week.

But this support may prove fleeting.

The market is braced for signs of recovering US oil production after weekly data from Baker Hughes showed that US drillers added rigs for only the second time this year, analysts said.

“Oil prices at $50 a barrel could revive shale drilling activity and stabilise declining US oil production, possibly already harbingered by the recent uptick in rig counts,” said Norbert Rücker, head of commodities research at Julius Baer.

"Meanwhile, sentiment remains at pronounced bullish levels across many markets from which it can only reverse going forward."