Oil prices rallied Thursday with Brent breaching $45 a barrel on worries over output from Canada and Libya, while traders reacted also to falling US production.
Approaching 1700 GMT, New York’s West Texas Intermediate (WTI) for delivery in June was up $1 at $44.78 per barrel.
European benchmark Brent crude for July delivery jumped 82 cents to $45.44 compared with Wednesday’s close.
“Oil prices are rising today after three consecutive lower closes,” said analyst David Cheetham at London-based brokerage XTB.
“Firstly, a huge wildfire — which has forced the evacuation of 88,000 people in the western Canadian oil city of Fort McMurray — has seen some pipelines in the region being shut and disruptions to output at several facilities,” Cheetham told AFP.
“On top of that a political stand-off in Libya which prevented a Glencore cargo from loading raises concerns about… levels of output.”
Cheetham added: “In the grand scheme of things both these developments are unlikely to be significant driving factors for the market going forward, but the timing coinciding with some short term oversold conditions has seen the price move higher so far today.”
Authorities say wildfires are burning out of control in the Alberta oil sands region of Canada, which mines and ships heavy crude to the US, and oil companies have reduced operations as non-essential employees are evacuated.
“Prices (are) supported today by an on-going wildfire in Alberta’s oil sands region, presenting a bullish risk for Canadian production,” added Inenco analyst Dorian Lucas.
– Lower US oil output –
News of the Canada fires came as official data showed that US oil output sank last week by more than 100,000 barrels a day to 8.83 million, its lowest level since September 2014.
While US commercial crude oil inventories rose in the same week, investors focused more on hopes the production decline would help ease a global supply glut.
“US oil production at its lowest in eight months, as well as a wildfire limiting Canadian output, have buoyed prices,” added CMC Markets analyst Jasper Lawler on Thursday.
The wildfires pressed in Thursday on the Canadian oil city of Fort McMurray after more than 80,000 people were forced to flee and authorities warned that the next 24 hours would be critical for the city’s survival.
BMI Research said it expects US shale oil production to continue to decline over the long term and this should help ease the saturated market.
“We maintain that a strong decline in US shale output will underpin the beginning of a two-year market rebalancing whereby prices will recover gradually over the next few quarters,” it said in a note.
Strong production from the US and the Organization of Petroleum Exporting Countries (OPEC) are key contributors to the glut that has sent prices plunging more than 60 percent from peaks above $100 in mid-2014.
