Oil falls below $50 on higher supply outlook, economic worries

Oil fell below $50 a barrel on Thursday, pressured by higher Nigerian output and concern about the economic outlook following Britain’s vote to leave the European Union last week.

Returning Nigerian supply will put pressure on prices, Goldman Sachs said, adding that outages caused by Canadian wildfires would virtually end by September.

Norwegian supply could be hit by a threatened workers’ strike, however.

Brent crude was down 88 cents a barrel at $49.73 as of 1242 GMT, having risen in the two previous sessions. U.S. crude was down $1.02 to $48.86.

“Supply is gradually improving in Canada, although in Norway we still have some risk,” said Olivier Jakob of Petromatrix, who added a weak gasoline refining margin was weighing on crude.

“I don’t think the case is there for $30 oil, but to go to $60 you need to see stronger support from the (refined)products.”

Brent has risen by 85 percent since reaching a 12-year low in January, supported by expectations that a glut that has been weighing on prices since 2014 would start to ease and by unplanned losses from Canada to Nigeria.

“We have a large overhang of surplus stock to work off and that will take some time as well. I’d imagine that over time you will see more upward pressure than downward pressure on prices,” said Royal Dutch Shell’s chief executive Ben van Beurden.

Nonetheless, the return of some of that oil and concern over a slowing economy, compounded by Britain’s vote to leave the European Union, are weighing near-term, analysts said.

Adding to economic concerns, industrial output in Asia’s second-largest economy, Japan, slid in May at the fastest rate in three months to its lowest level since June 2013.

On the supply front, oil production in Nigeria has risen to about 1.9 million barrels per day (bpd) from 1.6 million, due to repairs and a lack of new major attacks on pipelines in the Delta region, the state oil company said on Monday.

“Short-term supply conditions look overwhelmingly bearish,” said Georgi Slavov, global head of energy, iron ore and shipping research at Marex Spectron, in a report on Wednesday.

In Norway, oil companies and trade unions began two-day wage talks in a bid to avert a strike that would initially cut the country’s oil and gas output by 12 percent, the Norwegian Oil and Gas Association said.

Oil gained some support from tightening supplies in the United States. U.S. crude stockpiles fell for a sixth consecutive week, the U.S. Energy Information Administration reported on Wednesday.