Crude prices rise as supply outages ease worries about global glut
London (May 10) Oil prices traded higher on Tuesday, with supply outages from Canada to Nigeria helping alleviate the global glut of crude.
Brent crude LCON6, +0.87% , the global oil benchmark, rose 1.1% to $44.11 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLM6, -0.23% were trading up 0.6% at $43.72 a barrel.
Wildfires in Canada’s oil-rich Alberta province have knocked off some 1.6 million barrels a day according to consultancy Energy Aspects. Several companies including Suncor, BP, and Phillips 66 have declared force majeure on Canadian crude.
Spread of Canadian wildfires slows
Cooler temperatures help slow the spread of wildfires that ravaged the Canadian town of Fort McMurray, though officials said the blazes could continue to burn for months.
Fire officials said cooler temperatures have slowed the spread of the wildfires since Sunday deliveries in May, but the situation could last for several weeks given the scale of the fire, Energy Aspects said. This adds to continuing oil output disruptions around the globe.
“The wildfires in Alberta, rising tensions and further disruptions to crude exports in Libya, and a new outage in Nigeria amid increasing violence have definitely added some bullish pressure to prices,” said Michael Wittner, oil analyst at Société Générale.
Read: Carnage in the oil patch, summed up in one telling infographic
The production outages are helping reduce a global oversupply of crude, which has battered prices since June 2014. Analysts, however, say that these disruptions are temporary and most of those barrels will come back online soon.
“The current reality is that the global oil market remains oversupplied this quarter, and crude and product inventories are more than ample,” Wittner said.
The hope for many on the market is that strong demand for crude will be able to mop up the surplus. On Tuesday, the chief executive of Saudi Aramco, Saudi Arabia’s giant state-owned oil company, said that he expects global oil demand to rise by 1.2 million barrels a day this year.
“We’re seeing a global increase in demand,” said Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, at a press briefing at the company’s headquarters. “We are looking at the current market status that, even though challenging, is an excellent opportunity for growth.”
Market participants will be looking to weekly U.S. data to assess the state of the glut. Oil stockpiles in the U.S. continue to hover near record highs.
Private data forecaster Genscape Inc. said on Monday that inventories at the key U.S. delivery hub in Cushing, Okla. increased by 1.4 million barrels. The American Petroleum Institute, an industry group, will release its inventory estimate later on Tuesday, followed by the official data by the U.S. Energy Information Administration on Wednesday.