Oil price tops $50 for first time in 2016 as Canada fires fuel recovery

The barrel price of Brent Crude oil, which is seen as the global benchmark of oil industry performance, has reached $50 for the first time in 2016 as supply problems due to wildfires in Canada continue to have an impact. The oil industry has been in turmoil over the past several years, with the price of Brent Crude hitting 13-year lows of less than $28 a barrel in February amid concerns of a global oversupply and disruption in the world markets. The $50 milestone was reached in the early hours of the morning during Asian trading following the news that US inventories of oil had fallen in response to disruption in Canada.

The remarkable over 80% rally in oil since earlier this year may have been overdone, as the underlying macro conditions have not changed proportionally. This suggested that speculative trades have driven up the price these months, and may not be sustainable.

IG Markets analyst Bernard Aw

Wildfires in the country have resulted in a cut in oil output by up to a third. The value was later holding strong at $50.16. Prices had already been on the up as the Organisation of Petroleum Exporting Countries, or OPEC, hosted talks earlier this year in an effort to reach agreement on a freeze on oil production, in order to reduce the global glut that has been dragging the oil value down. The price boost should come as a relief to countries like Venezuela where oil accounts for a high proportion of GDP, resulting in economic chaos as the global slump had continued. Some analysts, however, are sceptical that the increase can continue.