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Oil Breaks Above $50 for First Time in Seven Months

Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months as a global supply glut that plagued the market for nearly two years showed signs of easing.

Oil prices have rallied in recent weeks as a string of outages, due in part to wildfires in Canada and unrest in Nigeria and Libya, knocked out nearly 4 million barrels per day of production.

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Pump jacks work at dawn in an oil field near Lost Hills, California, in 2014. David McNew / Getty Images file

Above $50 a barrel, oil was seen by many market players as breaching a psychological barrier that could lead producers, particularly among U.S. shale companies, to revive operations scrapped in recent years.

Global benchmark Brent crude oil was up 31 cents at $50.05 a barrel, the highest in nearly 7 months, after a larger-than-expected draw in U.S. crude oil inventories last week indicated buyers are starting to mop up spare supply.

U.S. crude futures were up 30 cents at $49.86 a barrel, after touching $49.97, the highest since mid-October.

"Certainly ($50) is a psychological barrier. There is a momentum, people will try and push it up over that," said Ric Spooner, chief market analyst at Sydney's CMC Markets.

A source at oil producer Chevron said on Thursday its activities in Nigeria had been "grounded" by a militant attack, worsening a situation that had already restricted the supply of hundreds of thousands of barrels.

Where Does Oil Come From? 0:43

A meeting of the Organization of the Petroleum Exporting Countries on June 2 in Vienna to discuss the oil market added further support.

However, the recent rise in oil prices and friction between key members Saudi Arabia and Iran mean a coordinated effort to intervene to support prices is slim.

"A (production) freeze remains a tail risk, but a very small one. The bigger risk is that following the meeting Saudi will increase production to meet rising summer domestic demand, to preserve market share in its oil wars with Iran and Iraq," David Hufton, head of PVM Oil brokers, said.

"These are all compelling reasons to expect Saudi production to rise over the summer months."