BP warns on Canadian oil deliveries as wildfire burns on

Fri May 6, 2016 7:29pm EDT
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By Catherine Ngai

NEW YORK (Reuters) - BP PLC said on Friday it would not be able to deliver on some contracts for Canadian crude due to a wildfire that has cut Canada's oil sands output in half and snarled supply lines.

The oil major's Canadian unit alerted customers of a "force majeure event" at one of its suppliers, a BP spokesperson said, which means several grades of Canadian crude oil will not be as readily available for its customers through the rest of May.

A force majeure event is an unforeseen event that prevents a party from fulfilling a contract. The move is likely to deepen concerns about tightening supplies of crude to U.S. refiners as the nearly week-long blaze rages on.

The force majeure comes after the fire this week forced the evacuation of 88,000 people from Fort McMurray, located in the heartland of Alberta's energy region, and resulted in the shutdown of about 1 million barrels per day in production, nearly half of Canada's oil sands output.

At least 10 oil sands operators have reduced production as a result of the evacuations and emergency measures have complicated delivery of oil via rail, pipeline and highways.

The production cuts caused key Canadian crude prices to rally to their highest in months and boosted U.S. futures this week.[CRU/CA] [O/R]

BP produces oil in Canada via a partnership with Husky Energy Inc.

Husky said earlier this week it cut production at its Sunrise oil sands project to 10,000 bpd from 30,000 bpd after a pipeline that supplies the project with diluent was shut down.   Continued...

A massive plume of smoke, from a wildfire north of the city, stretches over Fort McMurray, Alberta, Canada Wednesday evening, May 5, 2016. Courtesy Chris Schwarz/Government of Alberta/Handout via REUTERS