Oil up as fire curbs Canada output; higher dollar, stockpiles cap gains

Thu May 5, 2016 3:37pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - 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 U.S. stockpile build cut into gains.

While the oil sands facilities are mostly to the north of the wildfire in city of Fort McMurray in Alberta that is spreading south, as much as a third of Canada's daily crude capacity has been cut and some major pipelines closed after more evacuations were ordered.

A stranded Glencore oil cargo in Libya, after a stand-off between eastern and western political factions, also fed the rally at first.

Some traders said the market had overreacted to both events.

"The Canadian blaze, horrific as it is, is far south of the real producing fields to cause real lasting damage to production there," said John Kilduff, partner at New York energy hedge fund Again Capital. "The Libyan barrels weren't really on the market anyway."

Crude oil futures jumped 5 percent before paring gains. Their retreat came as the dollar rose 0.6 percent, its most in three weeks, making greenback-denominated oil costlier for holders of the euro and other currencies.

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 U.S. crude futures during the week to May 3. The Genscape report came on the heels of U.S. government data showing total crude stockpiles at record highs above 543 million barrels last week.

Brent futures settled up 39 cents, or 0.9 percent, at $45.01 a barrel.   Continued...

 
Officers look on as smoke from Fort McMurray's raging wildfires billow into the air after their city was evacuated, May 4, 2016. REUTERS/Topher Seguin