Oil prices climb above $50 a barrel for the first time in 2016 amid increased demand

Oil prices have hit the $50 (£33.9, €44.8) a barrel threshold for the first time in 2016, as increased worldwide demand and disruptions to supply continued to boost recovery.

At 8.09am on Thursday (26 May), the benchmark Brent crude was trading at $50.23 a barrel, up 0.97% from the previous close, while the price of West Texas Intermediate rose 0.82% to $49.97 a barrel.

The former has gained 80% since hitting a 13-year low of $28 a barrel in January, when the oil crisis reached its peak amid global oversupply and weakening demand. Oil prices have been boosted by short-term disruptions in Canada and Nigeria, which have balanced an increase in production in Saudi Arabia and Iran, and by stronger demand in Russia and China.

Data released by US Department of Energy showed crude oil inventories in the US fell by 4.2 million barrels to 537.1 million barrels in the week to 20 May, as fires in Canada, the biggest supplier to the US, caused disruptions to supply.

Fires in Canada's western provinces have curbed production by approximately one million barrels per day.

The increase in price is in line with a forecast from analysts at Goldman Sachs who, earlier this week, said they expect crude prices to stabilise around the $50 a barrel mark for the remainder of 2016. Economists at the US bank added oil prices are forecast to rise to approximately $60 a barrel by the end of 2017.

"The oil market continues to deliver its share of surprises, with low prices driving disruptions in Nigeria, higher output in Iran and better demand," Goldman Sachs analysts said in a statement.

"With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected."

Over the past couple of months, oil prices have also been boosted by negotiations between Russia and the Organization for the Petroleum Exporting Countries (Opec) over a deal to curb production. However, analysts warned the prospect of an agreement looked remote.

"While oil prices continue to tick higher, note that the prospect of an Opec-led deal to control output looks 'dead,' even as Iran approaches pre-sanctions production levels – which it had previously said would make it more at home to participating in discussions," said Michael Van Dulken, head of research at Accendo Markets.

Oil firms have also started planning for higher oil prices, a sign confidence might be slowly returning to the sector. Last month, BP said it had budgeted for prices to be between $50 and $55 a barrel in 2017.