Crude Oil Hits 11-Month High
The price of US WTI crude oil closed for trading on Tuesday above the $50 per barrel mark for the first time since July. The commodity continued to trade higher early Wednesday morning and was seen trading above the $51 per barrel handle.
The last time WTI crude futures traded near the $51 per barrel level was on July 21 of last year when it hit a high of $50.92.
Accordingly, oil is now trading at an 11-month high, which is boosting oil-related products. For example, the VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return (NYSE: UWTI) is trading higher by nearly 4 percent early Wednesday morning.
Meanwhile, the United States Oil Fund LP (ETF) (NYSE: USO), an exchange-traded fund designed to reflect the price change of light, sweet crude oil that trades on the New York Mercantile Exchange, is now higher by more than 11 percent since the start of 2016.
The price of oil continues to rise on supply disruptions from countries such as Nigeria while U.S. crude oil inventories are decreasing.
The American Petroleum Institute said on Tuesday that U.S. crude supplies fell by 3.6 million barrels last week which exceeded the 3.1 million barrel drop that analysts polled by the Wall Street Journal were expecting.
Meanwhile, Chinese oil imports for the first five months of 2016 were higher by 16 percent when compared to the same period a year ago, the Wall Street Journal further noted.
"This extra demand has boosted not only the price of oil, but also optimism that the world's second-largest oil consumer may be arresting its economic downturn — something which would be supportive for oil and other commodities," Mihir Kapadia, chief executive at Sun Global Investments told the Wall Street Journal.
However, now that the price of oil has climbed above the psychologically important $50 per barrel level, U.S. shale producers could be tempted to boost their output which could flood the market with excess crude.
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