Nigeria fears helps lift oil prices; sends stock markets and loonie higher

TORONTO – An upbeat forecast from a big U.S. investment bank, along with fears over how a disruption in crude production in Nigeria will impact global supply, helped rally oil prices to a six-month high Monday.

The June contract for benchmark North American crude rose $1.51 to US$47.72 a barrel, a level not seen since Nov. 3, when it settled at US$47.90.

Higher oil prices helped lift Canada’s largest stock market, the S&P/TSX composite index, up one per cent or 144.91 points to 13,893.49. All sectors rose on the TSX, with mining and energy companies leading the charge.

The positive sentiment in oil is being driven by production problems due to conflict in Nigeria, adding to ongoing cutbacks by oilsands producers in the fire-ravaged Fort McMurray, Alta., area.

Temporary stoppages in both places have helped ease the glut in global supply and raise crude prices.

Oil prices also got a boost from a forecast from Goldman Sachs that said the crude market has gone from oversupply to a “deficit” much earlier than expected.

Goldman Sachs, normally bearish on oil, now predicts West Texas Intermediate crude will rise to US$50 in the second half of this year after having earlier predicted it could drop below US$20 barrel amid increasing supplies and flagging demand.

“All of that is compounding on the outlook to push prices a little higher,” said Craig Fehr, a Canadian markets strategist with Edward Jones in St. Louis.

“What we’ve seen is a steady outlook for global demand coupled with a reduced outlook for supply given the disruptions in Nigeria and elsewhere. That combination has really put a floor underneath oil very recently.”

Fehr warned that oil prices will continue to stay volatile at these levels, and does not expect them to rise to US$70-80 a barrel in the near term.

The crude rally also helped send the oil-sensitive Canadian dollar higher, with the currency gaining 0.23 of a U.S. cent to 77.54 cents US.

Elsewhere in commodities, July natural gas slumped seven cents to US$2.18 per mmBtu, while June gold edged up $1.50 to US$1,274.20 a troy ounce. July copper added two cents to US$2.09 a pound.

In New York, the Dow Jones industrials shot up 175.39 points to 17,710.71, while the broader S&P 500 rose 20.05 points to 2,066.66 and the Nasdaq added 57.78 points to 4,775.46, with help from a big gain in the shares of tech giant Apple Inc. (Nasdaq:AAPL).

Regulatory documents show that Warren Buffett’s Berkshire Hathaway bought 9.8 million Apple shares in the first quarter, a stake now worth nearly US$1 billion. Apple stock rose $3.36 or 3.71 per cent to US$93.88.

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