06 May Canada wildfires cut into oil production
The price of crude oil has increased after wildfires in the province of Alberta, Canada devastated the country’s oil-sands district forcing companies to put production on hold.
Alberta has declared a state of emergency and forced all 88,000 residents to leave the city. Oil companies have evacuated staff and reduced production due to pipeline outages and the risk of the flames.
Outages are anticipated to be temporary but prices soared in recent trading. US Benchmark West Texas Intermediate increased two per cent to US$44.40 a barrel yesterday and Brent crude added 1.5 per cent to $45.12 a barrel.
Tim Pickering, CEO of Capital Advisors Ltd which manages $300 million on the Canadian Crude Index said if oil production halted due to the Canadian fires it would nearly wipe out the world’s oversupply.
“This is the most important issue in oil today,” said Pickering. “That will put the system back in check really quick.”
Exxon Mobil’s Imperial Oil and Conoco Phillips shut production yesterday cutting an undisclosed amount at its 194,000 barrel-a-day mine.
Royal Dutch Shell PLC closed two oil-sands mines which produces 255,000 barrels a day.
“That’s largely being done to allow folks to focus on rendering aid to the community and emergency response,” said Lee Tillman, CEO of Marathon Oil. “The mines themselves are not under any direct or immediate threat.”
The cause of the wildfire is thought to be the El Niño warm weather front producing dry weather conditions.