Canadian oil surges as wildfire knocks out more production
By David Gaffen
NEW YORK (Reuters) - Canadian crude prices hit their highest levels in nearly a year on Thursday, as a raging wildfire in northern Alberta shuttered nearly one-third of the nation's oil sands production and closed key pipelines, raising concerns about temporary shortages.
At least 680,000 barrels per day of crude output is offline, according to Reuters calculations, out of Canada's total oil sands production of 2.2 million barrels a day, though some operators, including Syncrude, have not disclosed how much production has been shut.
The light synthetic crude grade from the oil sands for May delivery doubled to a premium of $7.10 a barrel over West Texas crude in thin volume on Thursday, according to Shorcan, up from the previous settlement at $3.50 a barrel.
That was the largest premium to the U.S. benchmark since June of last year, a sign of concern about a short-term supply crunch even as the U.S. market remains awash with material.
So far, the wildfire has forced eight oil sands operators, including Suncor Energy Inc, Shell Canada and others to reduce production and evacuate operations near the city of Fort McMurray on Thursday as the massive blaze spread south. Officials said they expected the fire to grow later in the day.
The wildfire also stymied transportation of crude and feedstocks normally delivered via trains, pipelines and roads across the vast oil sands, which hold the world's third-largest crude reserves after Saudi Arabia and Venezuela.
"These are pretty sizable numbers," said Mike Tran, energy strategist at RBC Capital Markets. "How quick it returns is based on how quickly they can get staffing back, given the entire space has been evacuated."
The big cuts by some of the world's major producers boosted prices, even as concerns about immediate supplies to refineries across the border from Texas to Ohio that use its heavy crude were limited due to record high inventories. Continued...