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Oil prices settled above US$50 a barrel for the first time in nearly a year on Tuesday, a sign that traders are confident that a balance can be struck between supply and demand in the global crude market.
The July benchmark contract for West Texas Intermediate crude closed 67 cents higher to US$50.36 a barrel, marking the first time oil has settled above the US$50 mark since July 21, 2015.
"$50 is a big psychological hurdle for crude oil, and it’s one that it’s been bumping up against for a couple of weeks now," said Colin Cieszynski, chief market strategist at CMC Markets Canada.
"To see it break through is very encouraging and suggests that there is enough support to keep carrying crude oil higher."
Crude prices have gradually risen in recent weeks due to several factors, including the wildfires in Fort McMurray, Alta., which at one point may have taken out as much as half of Canada’s total oilsands production, according to some estimates. Those operations have gradually started to come back online.
Militant attacks on pipeline infrastructure in Nigeria have also caused supply disruptions in the oil−producing country, helping lift prices.
Cieszynski said traders are encouraged by the U.S. Federal Reserve’s wait−and−see approach on interest rate hikes. The central bank has said that it plans on hiking rates but would not to commit to when that might happen.
Oil prices are often boosted on signs of a growing economy because it drives up the demand for crude.
Once that happens, it will be important for the global market to be able to strike a balance between supply and demand or else oil prices are at risk of falling again, Cieszynski said.
Canada’s economy has been hit hard by a rapid and deep decline in global oil prices that began in 2014, when crude prices were above US$100 a barrel.
In February, oil settled as low as US$26.21 a barrel.
"It’s a pretty spectacular move in a fairly relatively short period of time," Cieszynski said.
"We might just see it level off here for a while, for the next few weeks, in around US$50."
Rising oil prices also helped the loonie, which climbed 0.22 of a U.S. cent to 78.30 cents US.
In Toronto, the S&P/TSX composite index was up 89.45 points at 14,365.61, driven by gains in energy and bank stocks.
On Wall Street, the Dow Jones industrial average added 17.95 points at 17,938.28, the broader S&P 500 composite index advanced 2.72 points to 2,112.13 and the Nasdaq composite fell 6.96 points to 4,961.75.
In other commodities, July natural gas was down a penny at US$2.47 per mmBTU, August gold fell 40 cents to US$1,247 an ounce and July copper contracts fell seven cents to US$2.05 a pound.
-The Canadian Press