Brent and then West Texas Intermediate (WTI) oil prices both flew up to $50 per barrel (bbl) in trading May 26, the first time spot prices have climbed that high since July 2015.

For much of the afternoon afterward, the price was just below the $50 mark.

The prompt-month WTI contract traded above $50/bbl for the first time since October 2015, primarily due to geopolitical events in Kuwait, the United Arab Emirates (UAE) and wildfires in Canada. Continuing supply disruptions in Nigeria may also cut the nation’s production to a 20-year low, industry observers and other experts said.

Nigeria routinely has unplanned outages ranging from 200,000 barrels per day (Mbbl/d) to 300 Mbbl/d, but in the past they have reached 500 Mbbl/d.

In February the market reached its low point at about $27. The fundamental difference since then is about 1 MMbbl/d more oil being stored in tanks, pipelines or ships around the world, said Andrew Fletcher, senior vice president, commodity derivatives, at KeyBank National Association.

“Lately we have seen the prompt rally, and I think for a number of reasons,” Fletcher told Hart Energy. “Firstly, I think the market was overdone to the downside. Secondly, short covering from financial players has helped support the market. Finally the outages have helped support the front of the curve.”

Fletcher said the curve has flattened significantly over the past month to the extent that contango no longer pays for the carrying record levels of oil inventory.

“All prompt barrels should be sold directly on the market rather than stored,” he said. “Although not a good predictor of reality, the shape of the curve tells you what the oil community thinks to the forward market—that it has limited upside.”

If the market can hang on at similar levels and international outages continue, the market could consolidate at current prices before moving higher in 2017. At that point, fundamentals will tighten and record storage levels will be lowered, he said.

“However, producers are not out of the woods yet,” he said. “Although prices are higher they could see their margins squeezed as production costs begin to creep higher.”

Dan K. Eberhart, CEO of Canary LLC, a Denver-based oilfield services company, told Hart Energy the market has overcorrected.

“The outages will help ease the inventory glut in the short run,” he said. “The declining U.S. production and robust demand growth make $50 oil more of a floor and less of a ceiling as we move forward.”

During the historic price collapse of the 1980s, oil fell to about $25 per barrel in 2016 dollars.

Eberhart said the rise to $50-per-barrel oil means a return to stability, particularly for domestic shale producers. At this level, companies that saw the value of their product drop more than 75% in less than two years might have the confidence to resume drilling activities.

"I think we're moving into a period of greater stability for American producers," Eberhart said.

The gradual price increase in May to $50 may give high-cost producers some fresh air and allow them to maintain production, said Ole Hansen, head of commodity strategy at Saxo Bank.

However, a lot depends on the price at which oil closes. In the near term disruptions appear be carrying momentum into the market.

“We’ve seen plenty of supply disruptions throughout May which have helped reduce production thereby helping to balance the market,” Hansen said. “We are seeing on the forward curve as the front goes up the back months are struggling to go up at the same pace. That does indicate we’re seeing some producer hedging coming into the backend of the futures curve.”

Darren Barbee can be reached at dbarbee@hartenergy.com.