(In paragraph 6, corrects Brent settlement to $49.59, not
$49.74)
* Brent breaches $50 first for time since Nov, WTI since Oct
* Supply outages accelerate market recovery
* If shale drillers return, glut could grow
* Eyes on OPEC meeting to see if Saudis hike output
By Barani Krishnan
NEW YORK, May 26 (Reuters) - Oil prices hit $50 a barrel on
Thursday for the first time in seven months, then bounced below
that level and settled lower on the day as investors worried
robust price gains could encourage more output and add to the
global glut.
Wildfires in Canada's oil sands, unrest in the Nigerian and
Libyan energy sectors, and a near economic meltdown in OPEC
member Venezuela have knocked out nearly 4 million barrels per
day in immediate production, sparking a buying frenzy in crude
futures.
Brent and U.S. crude's West Texas Intermediate (WTI) futures
have risen nearly 90 percent from 12-year lows hit this winter.
They have recouped about half of what they lost since mid-2014
when both traded at above $100 a barrel.
A climb above $50 per barrel could spur producers,
particularly U.S. shale drillers, to revive scrapped operations,
which could bloat supplies and trigger a new selloff, analysts
said.
"We are viewing current risk/reward ratios as unfavorable
toward new longs at current levels," said Jim Ritterbusch of
Chicago-based oil markets consultancy Ritterbusch & Associates,
who cites a potential drop of Brent to $47.50.
Brent LCOc1 surged as high as $50.51, its highest since
early November, then retreated and settled down 15 cents at
$49.59 a barrel.
WTI CLc1 fell 8 cents to settle at $49.48, after reaching
$50.21, its highest since early October.
U.S. crude for the balance of 2016 CLBALst remained above
$50 while the calendar strip for 2017 CLYstc1 was above $51.
"I am maintaining my oil view at neutral with a short term
bias to the upside," said Dominick Chirichella, senior partner
at the Energy Management Institute in New York. "The global
surplus still exists and there is still a possibility that oil
prices could retrace further."
But he conceded that crude was trading "more and more in
sync with the forward looking or perception view with the
overall bearish fundamentals mostly priced into the market as
production issues offset any short term negativity".
Adding to outage concerns, a source at Chevron Corp (NYSE:CVX) CVX.N
said the producer's activities in Nigeria had been "grounded" by
a militant attack, worsening a situation that had already
restricted hundreds of thousands of barrels from reaching the
market.
Investors will watch next month's meeting of the
Organization of the Petroleum Exporting Countries (OPEC) for
signs of an output hike.
"The bigger risk is that following the meeting, (the) Saudis
will increase production to meet rising summer domestic demand,
to preserve market share in its oil wars with Iran and Iraq,"
David Hufton, head of PVM Oil brokers, said.