Oil near six-month high as outages support

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Oil Rises to Six-Month High

Oil traded at around $49 a barrel on Tuesday within sight of a six-month high, supported by supply outages in Nigeria, Canada and other producers that are eroding a persistent glut.

Prices eased from the highs after Libyan factions agreed in principle to have one oil organization, potentially bringing higher output a step closer. Also, traders were eyeing the restart soon of some of the shut Nigerian output.

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Brent crude traded at a six-month high of $49.47 intra-day and at 1018 GMT was down 7 cents at $48.90. U.S. crude was up 14 cents at $47.86, having earlier reached $48.42, the highest since October.

"Globally, there are still a lot of supply disruptions and this comes on top of natural declines," said Olivier Jakob, oil analyst at Petromatrix. "It does bring forward the expected rebalancing in the second half."

Beside unplanned outages, supply from non-OPEC countries is expected by the International Energy Agency and other forecasters to fall this year and output in some OPEC nations such as Venezuela is suffering because of a cash crunch.

Profit-taking by some investors could be prompting some weakness in prices on Tuesday, but further gains are likely given the supply losses, Commerzbank said.

"I expect prices to take a shot at $50," said Carsten Fritsch, analyst at Commerzbank. "The outages in Canada and Nigeria alone are probably enough to leave the global oil market undersupplied at present."

Oil is still only half its level of mid-2014, when concern about excess supply prompted prices to begin a decline from over $100, and high inventories have limited the response of prices to the outages.

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Still, the disruptions this week triggered a U-turn in the oil market outlook of Goldman Sachs. The bank, which had been warning of a risk of $20 oil, now sees U.S. crude trading as high as $50 in the second half of 2016.

Crude inventories in the United States, at a record high in April, are expected to decline in weekly supply reports due later on Tuesday and on Wednesday, which would support the view that excess supply is easing.

The first report, from industry group the American Petroleum Institute, is due at 4:30 p.m. EDT (2030 GMT) on Tuesday.

Further support could come from lower output in the United States. U.S. shale oil has been declining and is expected to fall in June for an eighth consecutive month, according to a U.S. government forecast on Monday.

(Additional reporting by Aaron Sheldrick; Editing by Adrian Croft and David Evans)

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Oil prices hit near six-month high 5/17
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Oil near six-month high as outages support
A Saudi Aramco car with visiting journalists is seen outside the company's Natural Gas Liquids plant in Saudi Arabia's remote Empty Quarter near the United Arab Emirates, on May 10, 2016. Despite collapsed global oil prices, production is expanding at Shaybah, as it is in other units of the company at the centre of the kingdom's Vision 2030 drive for diversification away from oil. The Saudi government plans to sell less than five percent of the company in what officials say will be the world's largest-ever share offering, while transforming Saudi Aramco into 'a global industrial conglomerate'. By 2020 the company says it will have tripled its gas processing capacity from levels at the turn of the century. / AFP / IAN TIMBERLAKE (Photo credit should read IAN TIMBERLAKE/AFP/Getty Images)
A picture taken on May 10, 2016 from a Saudi Aramco passenger airplane shows sand dunes near the Shaybah oilfield, some 800 kilometers (500 miles) southeast of the eastern oil center of Dhahran. Despite collapsed global oil prices, production is expanding at Shaybah, as it is in other units of the company at the centre of the kingdom's Vision 2030 drive for diversification away from oil. The Saudi government plans to sell less than five percent of the company in what officials say will be the world's largest-ever share offering, while transforming Saudi Aramco into 'a global industrial conglomerate'. By 2020 the company says it will have tripled its gas processing capacity from levels at the turn of the century. / AFP / IAN TIMBERLAKE (Photo credit should read IAN TIMBERLAKE/AFP/Getty Images)
An Aramco staff member stands on a road at the Saudi Aramco airport surrounded by sand dunes at the Shaybah oilfield, some 800 kilometers (500 miles) southeast of the eastern oil center of Dhahran, in Saudi Arabia, on May 10, 2016. Despite collapsed global oil prices, production is expanding at Shaybah, as it is in other units of the company at the centre of the kingdom's Vision 2030 drive for diversification away from oil. The Saudi government plans to sell less than five percent of the company in what officials say will be the world's largest-ever share offering, while transforming Saudi Aramco into 'a global industrial conglomerate'. By 2020 the company says it will have tripled its gas processing capacity from levels at the turn of the century. / AFP / IAN TIMBERLAKE (Photo credit should read IAN TIMBERLAKE/AFP/Getty Images)
A picture taken on May 10, 2016 shows over Shaybah, the base for Saudi Aramco's Natural Gas Liquids plant and oil production in the surrounding Shaybah field in Saudi Arabia's remote Empty quarter desert close to the United Arab Emirates, on May 10, 2016. Despite collapsed global oil prices, production is expanding at Shaybah, as it is in other units of the company at the centre of the kingdom's Vision 2030 drive for diversification away from oil. The Saudi government plans to sell less than five percent of the company in what officials say will be the world's largest-ever share offering, while transforming Saudi Aramco into 'a global industrial conglomerate'. By 2020 the company says it will have tripled its gas processing capacity from levels at the turn of the century. / AFP / IAN TIMBERLAKE (Photo credit should read IAN TIMBERLAKE/AFP/Getty Images)
A mosque is seen behind the entrance gate to the administration area of Saudi Aramco headquarters, on May 10, 2016 in Dhahran, 400kms east of the capital Riyadh. Despite collapsed global oil prices, production is expanding at Shaybah, as it is in other units of the company at the centre of the kingdom's Vision 2030 drive for diversification away from oil. The Saudi government plans to sell less than five percent of the company in what officials say will be the world's largest-ever share offering, while transforming Saudi Aramco into 'a global industrial conglomerate'. By 2020 the company says it will have tripled its gas processing capacity from levels at the turn of the century. / AFP / IAN TIMBERLAKE (Photo credit should read IAN TIMBERLAKE/AFP/Getty Images)
A man fills a car with fuel at an Esso gas station in Vancouver, British Columbia, Canada, on Friday, May 6, 2016. The worst wildfire in Alberta history is boosting Canadian crude prices as oil companies evacuate workers and shut in output. Photographer: Ben Nelms/Bloomberg via Getty Images
Fuel prices are displayed on pumps at an Esso gas station in Vancouver, British Columbia, Canada, on Friday, May 6, 2016. The worst wildfire in Alberta history is boosting Canadian crude prices as oil companies evacuate workers and shut in output. Photographer: Ben Nelms/Bloomberg via Getty Images
Drivers fill cars with fuel at an Esso gas station in Vancouver, British Columbia, Canada, on Friday, May 6, 2016. The worst wildfire in Alberta history is boosting Canadian crude prices as oil companies evacuate workers and shut in output. Photographer: Ben Nelms/Bloomberg via Getty Images
A woman fills a car with fuel at a Chevron Corp. gas station in Vancouver, British Columbia, Canada, on Friday, May 6, 2016. The worst wildfire in Alberta history is boosting Canadian crude prices as oil companies evacuate workers and shut in output. Photographer: Ben Nelms/Bloomberg via Getty Images
Fuel prices are displayed at an Esso gas station in Vancouver, British Columbia, Canada, on Friday, May 6, 2016. The worst wildfire in Alberta history is boosting Canadian crude prices as oil companies evacuate workers and shut in output. Photographer: Ben Nelms/Bloomberg via Getty Images
A currency trader gestures at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, May 11, 2016. Asian stock markets were uneven on Wednesday as the price of oil fell and concerns about Chinese recovery weighed. (AP Photo/Ahn Young-joon)
Currency traders talk each other at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, May 11, 2016. Asian stock markets were uneven on Wednesday as the price of oil fell and concerns about Chinese recovery weighed. (AP Photo/Ahn Young-joon)
A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, May 11, 2016. Asian stock markets were uneven on Wednesday as the price of oil fell and concerns about Chinese recovery weighed. (AP Photo/Ahn Young-joon)
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