The international Brent crude benchmark crawled closer to $50 a barrel in early Asian trade on Wednesday as outages in Africa and Canada and production declines outside of the Middle East fueled expectations for tighter supply.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June recently traded at $48.44 a barrel, up $0.13 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.10 to $49.38 a barrel.
“While $50 sounds high today, this time two years ago it was about $100. I continue to believe from now going into 2017, dips should be bought as the market rebalances,” said Stuart Ive, a client manager at Wellington, New Zealand-based OM Financial.
Oil prices rose overnight, propelled by reports that Canadian forest fires forced more evacuations of oil sites, which threatened to delay the return of at least a million barrels a day of Canadian oil-sands production to the market.
Ongoing military attacks on oil infrastructure in Nigeria and instability in Libya have also curtailed production in those countries. Meanwhile, output from Latin American heavyweights is likely to slip 2.4% from a year earlier in 2016 due to scant investment, BMI Research said.
All these factors underpin upbeat views from the International Energy Agency that global oil is entering a phase of rebalancing. Goldman Sachs said the market has already moved into a deficit.
Adding to the bullishness is the expectation that U.S. crude stocks will contract more. U.S. stockpile data set for release later Wednesday is likely to show a decrease of 2.4 million barrels, according to The Wall Street Journal’s survey of analysts and brokers. That would mark the second weekly decline after a nearly unrelenting stream of inventory additions brought stockpiles at a record high.
An encouraging demand outlook is also prompting buying.
“India demand has been exceptional year-to-date and demand in China is being supported by increased infrastructure spending in addition to demand for transport fuels,” said Neil Beveridge, senior analyst at Bernstein Research.
Still, not all market participants are optimistic about the rally’s sustainability.
Tim Evans, an energy analyst at Citi Futures, said out total production from the Organization of the Petroleum Exporting Countries increased in April and the uptrend is likely to continue in May.
“With production from Kuwait likely rebounding from the April rate, some further increase from Iran, and Saudi Arabia having at least the potential to produce some additional barrels in the weeks ahead, we see a clear possibility that OPEC production for May could be higher still,” he said.
—Timothy Puko contributed to this article.
Write to Jenny W. Hsu at jenny.hsu@wsj.com