Oil prices hit their highest levels this year Monday following global supply disruptions and news from Goldman Sachs analysts that the world's crude glut has flipped to a deficit.
Recent production outages in Canada and Nigeria, combined with rising demand in China and India, have steadily reduced the nearly two-year-old oversupply that has weighed on prices since mid-2014. Oil jumped by more than 3 percent in afternoon trading Monday, while gains in energy companies boosted Wall Street stocks.
U.S. light, sweet oil for June delivery settled at a 2016 high, up $1.53 at $47.74 a barrel in New York. Brent, the global benchmark, was up $1.11 to $48.94 a barrel after touching $49.36 on ICE Futures Europe.
Global oil production surged in recent years as the U.S., Saudi Arabia, Russia and other oil-rich nations boosted output to record levels. As supply exceeded demand, prices plunged from above $100 a barrel in June 2014 to less than $30 a barrel earlier this year, starving the coffers of oil-dependent economies and forcing companies to slash billions of dollars in investments and cut thousands of jobs.
Worldwide crude inventories still stand near record highs, although the oversupply has narrowed in recent weeks due to outages. Ferocious wildfires across Canada's oil sands patch knocked out more than 1 million barrels per day in Canadian supply earlier this month. Nigeria's oil minister said Monday the nation's crude production had plunged nearly 40 percent to 1.4 million barrels per day due to militant attacks on facilities in the Niger Delta region.
Goldman Sachs Inc. said in a note dated Sunday that the recent outages have pushed the oil market into shortfall. The investment bank now expects U.S. oil prices to rise to $50 per barrel in the second half of 2016, up from its forecast last month of prices trading between $40 and $45.
The outages and Goldman outlook helped drive the S&P 500's energy index up 1.64 percent Monday, leading the gainers among the index's top 10 sectors. Oil majors Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) were both up more than 1 percent, providing the biggest boost to the U.S. energy sector.