Global supply outages emerged as contributing factors to a steep spike in crude oil prices Monday, though underlying metrics may point to stability. A group calling itself the Niger Delta Avengers is forcing many energy companies operating in the oil-rich Niger Delta to cut production following a string of attacks. The militant group is waging war on energy companies in the region and accused the government of favoring oil over the welfare of the people in the region. Following attacks last week, the group said the “liberation of our people is our priority.”
The outage from Nigeria, a member of the Organization of Petroleum Exporting Countries, is straining a U.S. market that’s relying more on the country for oil than last year. A top 10 exporter, Nigeria crude oil shipments to the United States were up 100 percent compared with levels from 2014.
Wildfires in Canada, one of the top North American producers, knocked out much of the oil production there in May. The provincial government in Alberta reported Sunday that all voluntary re-entries into the Fort McMurray area, central to the region’s oil sands industry, were completed.
Data from the National Energy Board show the 2016 average daily rate of production is 5 percent lower than reported for Canada in December. Canada is the No. 1 exporter of crude oil to the United States.
West Texas Intermediate, the U.S. benchmark price for crude oil, shot up 2 percent to $48.62 per barrel. The global benchmark Brent reached its highest level for the year early Monday, gaining 1.7 percent to $50.52 per barrel.
Crude oil prices are up roughly 80 percent from a low point below $30 per year in early 2016. That may be encouraging a return to more expensive reserve basins that were considered cost-prohibitive during the worst of the downturn.
Baker Hughes last week reported an increase in the number of rigs in service in the United States, a stark reversal from several weeks of decline. Canada lost six rigs against a gain of four in the United States.
The increase in the United States suggests energy companies may soon be producing more. While U.S. oil production is in decline in part because of the sluggish economy, higher output helped trigger the downturn because it pushed markets heavily toward the supply side. Outside of the shale basins in the Lower 48, crude oil production in Alaska is up about 6 percent from last year, based on a four-week moving average.