Oil Rallies And Bursts Through $50 A Barrel Ceiling

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The price of oil has hit $50 a barrel again after steadily bubbling up since the turn of the year.

Oil hit a low of $28 a barrel at the start of 2016 but has nudged $50.22 for the first time this year.

Now, the markets are keen to see if the price is maintained or falls back.

Oil prices seem to have recovered despite the best efforts of oil producing nations.

Bush fires raging out of control in oil fields around Fort McMurray, Alberta in Canada have soaked up reserves in North America, while terror attacks in the Niger delta, off Nigeria, have forced Chevron to turn off supplies collect from offshore by a giant pipeline hub.

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Together, these two unconnected incidents have wiped out oversupply problems OPEC ministers had squabbled about for months.

Fire and terror succeed where talking failed

The ministers met in April and could not come to an agreement with Iran over reducing exports.

However, the fire and terrorism has accomplished what talking could not – a reduction of more than a million barrels a day in production.

Two of the largest producers, Iran and Saudi Arabia are politically opposed in the Middle East. Both refuse to turn off the oil taps in fear of losing market share.

Analysts and OPEC are both trying to talk up the price of oil.

Goldman Sachs reckons the price will stick around $50 this year and maybe ratchet up to $60 next year.

A higher price helps faltering economies by pushing up prices and hoisting stubbornly low inflation along the way.

Huge job expat job losses

“A few weeks ago we were talking about recommissioning mothballed tankers to store a glut of oil,” said a Goldman Sachs spokesman.

“Now, events in North America and Africa have settled the matter and the market is in deficit much earlier than anyone could have predicted.”

As the price of oil has plunged, thousands of expat workers have lost their jobs.

Governments in the Middle East have also slashed utility and fuel subsidies for millions of people as they struggle with huge budget deficits arising from a sudden loss in income.

More jobs are expected to be lost as state-run firms stem their losses in Saudi Arabia and the United Arab Emirates.

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