Oil Rises as Canadian Wildfire Reduces Oil Sands Production

Some traders also pinned oil’s weakening to market intelligence firm Genscape’s report of a 1.35 million-barrels stockpile build at the Cushing, Oklahoma delivery hub for US crude futures during the week to May 3.

Huge forest fires have already torched at least 1,600 homes and forced the evacuation of about 88,000 people in the region, including the entire population of the oil sands town of Fort McMurray. Brent crude, the world benchmark, rose 2.6% to $45.77. The Organization of Petroleum Exporting Countries is now without a proposal to revive limits on production at its June meeting after failing last month to agree on a supply freeze, according to six delegates from the group.

Data by the U.S. Energy Information Administration (EIA) shows that U.S. crude oil output has fallen by 410,000 bpd this year, and by 800,000 bpd since mid-2015, as producers succumb to a rout that saw prices tumble more than 70% between mid-2014 and early-2016.

Aw said however that the market remains brimming with oil and “it is foolhardy to think that the supply glut issue is going away any time soon”.

Oil prices surged on Thursday after a raging wildfire near Canada’s oil sands region curbed output that mainly flows to the United States, before settling off their highs as a rebounding dollar and a huge US stockpile build cut into gains.

This optimism came despite another surge of 2.8-million barrels in United States commercial crude inventories to a fresh record of 543.394-million barrels.

Oil prices were down around one per cent, with global benchmark Brent prices set for their biggest weekly loss in almost four months.

Western Canadian Select (WCS) heavy blend crude for June delivery SHRWCSMc2 traded at $11.90 a barrel under the West Texas Intermediate benchmark on Friday, according to Shorcan Energy Brokers.

“Supply disruptions and closures helped push crude oil prices higher, despite the stronger USA -dollar”, ANZ bank said on Friday.

“The global surplus still exists and there is still a possibility that oil prices could retrace further”, said Dominick Chirichella, senior partner at the Energy Management Institute. Genscape reported that Cushing crude oil inventories rose by 821,969 barrels.

“This [build] really speaks to just how oversupplied we are”, said Robbie Fraser, commodity analyst at Schneider Electric.

Starkey said that while domestic stockpiles of oil are not quite as high as past year, they are still “extreme” on a historical basis.