Oil prices surge above $50 as US stockpiles shrink

Oil prices extend its gains Thursday morning to a nine-month high at $51.06 after United States (US) crude stockpiles declined more than expected and lawmakers edged closer toward a new stimulus agreement.

The last time it traded above $50 region was in March 4, 2020, when it traded at $51.13.

Brent crude futures rose 72 cents at 1.4percent, to $51.80 a barrel in early morning trading, while West Texas Intermediate (WTI) crude futures rose by 71 cents at 1.5percent, to $48.53 a barrel.

Both benchmarks hit their highest since early March.

This is good news for Nigeria as crude oil accounts for half of the government’s income and about 90 percent of Nigeria’s foreign exchange earnings. The proposed 2021 budget is benchmarked at $40 per barrel.

Optimism around the US spending package boosted oil prices, with nearly $900 billion in virus-related measures expected.

A weaker dollar, meanwhile, made commodities priced in the currency more attractive, and strong consumption of pandemic-resilient fuels increased crude demand in India.

According to the Energy Information Administration (EIA), US crude inventories fell by 3.1 million barrels in the week to December 11, more than analysts’ expectations of a 1.9-million-barrel drop.

Oil is up more than 30 percent since the end of October on optimism the rollout of Covid-19 vaccines will lead to a sustained recovery in demand, but the market is still facing a number of near-term hurdles including more supply from OPEC+ next month.