For the first time since July, the U.S. price for crude oil broke through $50 per barrel as seasonal demand pressures take hold over the market. File photo by Monika Graff/UPI | License Photo
NEW YORK, May 26 (UPI) -- Improvements in the U.S. labor sector and seasonal demand pressures pushed the price of crude above the $50 mark for the first time this year early Thursday.
The price for Brent crude oil rose 1.1 percent at the start of the trading day in New York to $50.32 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was up 1 percent to $50.09 per barrel, trading above the $50 mark for the first time since July.
Crude oil prices have rallied from lows below $30 per barrel earlier this year as chronic oversupplies faded from market. Crude oil traded regularly above $100 per barrel two years ago, giving companies in expensive U.S. shale basins the incentive and financial ability to produce more oil. Despite this year's recovery, U.S. crude oil production is down 8 percent from this time last year.
That, coupled with short-term supply issues brought on by wildfires in oil-rich Alberta and conflict in Nigeria, has put substantial positive pressure behind crude oil prices.
In the U.S. labor market, data released Thursday show first-time claims for the week ending May 21 were down 10,000 from the previous week. Labor has been a bright spot for the U.S. economy.
Federal Reserve Chair Janet Yellen warned earlier this year that financial conditions in the country were less supportive of growth and the labor market could turn lower as a result.
Demand pressures, particularly on the retail side, may be adding to the momentum in crude oil prices. The United States, the largest export market for Canadian oil, has one of the busiest holiday travel periods of the year this coming Memorial Day weekend.
U.S. crude oil stockpiles declined last week by about 0.7 percent as oversupply pressures wane. Oil stockpiles, however, are up 13 percent from the same week last year.
"We are still in an oversupply situation with very high inventories and floating storage, but the outages are easing this and would tighten the supply and demand balance if they continue into the summer," Ann-Louise Hittle, head of the Macro Oils division at analysis group Wood Mackenzie, said in response to emailed questions.
The rally in crude oil prices may be masking lingering macroeconomic weakness, however. Labor Department data show job losses continue to mount in Texas and North Dakota, the top two oil producers in the United States.
A report, meanwhile, from the Organization for Economic Cooperation and Development, of which the United States is a member, said growth in productivity, identified as key factor in economic output, "has been slowing in many advanced and emerging economies" in the aftermath of last decade's recession.