Canadian oil prices little changed, production shutins increase

Fri May 6, 2016 3:56pm EDT
 
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By David Gaffen

NEW YORK (Reuters) - Canadian crude prices were little changed on Friday following a two-day rally as a wildfire in northern Alberta kept nearly one-half of Canadian oil sands production shuttered, forcing BP's Canadian unit to warn clients of limited availability of oil through the rest of the month.

The massive fire has forced the evacuation of Fort McMurray's 88,000 residents, as the town, located in the heart of the oil-producing region of the province, has been overwhelmed by flames.

On Friday, BP's Canadian unit declared a so-called force majeure event, telling clients available Canadian crude grades will be reduced during May as a result of the fire. BP did not respond immediately to a request for comment.

Oil sands companies have shut about 1 million barrels per day of crude output, according to Reuters calculations, out of Canada's total oil sands production of 2.2 million barrels a day. Syncrude, located north of the city, said Friday its oil sands project has completely shut extraction at its Aurora bitumen mine; it had already reduced production prior to the fire.

Whether the fire would continue to affect prices was unclear. Most companies had not announced when they expect activity to restart.

“It really depends on how long it takes to get this fire under control and out," said Jackie Forrest, analyst at ARC Financial in Calgary, of the effect on prices.

"It’s a very difficult situation. If some major service operations (in Fort McMurray) are damaged, the oil sands will still get back online, but it may be at a higher cost than before, maybe having to secure service companies from much further away.”

Suncor Energy Inc, which has taken 350,000 bpd of capacity offline, said it expects to make a prompt return to full production, and planning for restart is well advanced.   Continued...

 
Smoke billows from the Fort McMurray wildfires as a truck drives down the highway in Kinosis, Alberta, Canada, May 5, 2016. REUTERS/Mark Blinch