Oil prices higher as Canada fire forces more ouput cutbacks
The spreading fire seems not to have directly damaged oil sands mining sites, but evacuations of more than 100,000 in the area have forced companies to slash production.
“It is now estimated that up to one million barrels per day of Canadian production has been taken offline,” said Matt Smith of ClipperData.
US benchmark West Texas Intermediate for delivery in June rose 34 cents to $44.66 a barrel on the New York Mercantile Exchange.
In London, Brent North Sea crude for July closed at $45.37 a barrel, up 36 cents from Thursday’s settlement.
WTI lost nearly three percent over the course of the week, snapping four straight weekly gains, and Brent shed more than four percent.
Smith noted that Canada produces about four million barrels a day of crude oil, and roughly 80 percent of it is produced in Alberta, where output is largely from oil sands. Most of that is piped to the US market.
“While infrastructure is yet to be damaged, the evacuation of staff in combination with the precautionary closure of pipelines is what is driving the drop in production,” Smith said.
Tim Evans of Citi Futures said the mounting production losses in Alberta continued to give the market key near-term support, but that could evaporate swiftly if output is restored quickly.
“Traders may not want the risk that the fire threat diminishes by Monday, allowing output to recover,” he noted.
Militants’ attack on an offshore Chevron facility in Nigeria, Africa’s largest oil producer, also drew traders attention.
“The drop in Nigerian oil production is also getting some play in the press, although we note that the decline wasn’t enough in April to do more than limit the increase in overall OPEC supply,” said Tim Evans of Citi Futures.