Oil prices climbed in Asia today with Brent breaching USD 45 a barrel following a fall in US production while raging wildfires threatened to cut Canadian output.
Authorities say wildfires are burning out of control in the Alberta oil sands region of Canada, which mines and ships heavy crude to the US, and oil companies have reduced operations as non-essential employees are evacuated.
News of the Canada fires came as official data showed that US oil output sank last week by more than 100,000 barrels a day to 8.83 million, its lowest level since September 2014.
While US commercial crude oil inventories rose in the same week, investors focused more on hopes the production decline would help ease a global supply glut.
At around 0110 IST, US benchmark West Texas Intermediate for delivery in June was up USD 1.19, or 2.72 per cent, at USD 44.97 and Brent crude for July advanced 94 cents, or 2.11 per cent, to USD 45.56.
"I think the Canada wildfires are the main reason for the rise in oil prices today on top of the US production decline," IG Markets analyst Bernard Aw told AFP.
"Oil companies there say the fires could affect more than one million barrels a day of capacity." The wildfires pressed in today on the Canadian oil city of Fort McMurray after more than 80,000 people were forced to flee and authorities warned that the next 24 hours would be critical for the city's survival.
BMI Research said it expects US shale oil production to continue to decline over the long term and this should help ease the saturated market.
"We maintain that a strong decline in US shale output will underpin the beginning of a two-year market rebalancing whereby prices will recover gradually over the next few quarters," it said in a note.
Strong production from the US and the Organisation of the Petroleum Exporting Countries are key contributors to the glut that has sent prices plunging more than 60 per cent from peaks above USD 100 in mid-2014.
But Aw said the market is brimming with oil and "it is foolhardy to think that the supply glut issue is going away any time soon".
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