Oil approaches US$50 on Canadian wildfires

[LONDON] Crude prices approached US$50 Wednesday as escalating wildfires in Canada's oil sands region helped to reduce a global supply glut, while traders awaited key US energy inventory data.

Shortly after 1100 GMT, US benchmark West Texas Intermediate (WTI) for delivery in June was 14 cents higher at US$48.45 a barrel.

Brent North Sea crude for July delivery rose 12 cents compared with Tuesday's close to US$49.40 a barrel.

Crude futures had zoomed Tuesday to their highest points so far this year, as the wildfires forced thousands more people to evacuate.

WTI rallied Tuesday to US$48.76 - the highest level since mid-October, 2015.

Brent had touched US$49.75, not reached since early November.

The oil market has shot higher this week also after US banking giant Goldman Sachs said supply disruptions in Africa's biggest oil producer Nigeria - along with better demand - had created a surprising short-term deficit.

It described the situation in Nigeria as "systemic" and said production in that country is likely to remain curtailed for the rest of the year.

"Prices are still being driven up by the high unscheduled supply outages in Canada and Nigeria," said Commerzbank analyst Carsten Fritsch.

"They amount to more than 2.0 million barrels per day and as such are entirely soaking up the oversupply on the global oil market.

"Without the rising supply from Iran, the oil market would be in significant deficit," he added.

Oil output from Iran has rebounded strongly since Western sanctions were lifted in January following a deal over its nuclear programme.

IG Markets analyst Bernard Aw said traders are feeling "more bullish" following the Goldman Sachs report that was published last weekend.

"Based on the report, the demand has started to outstrip supply," he told AFP.

"Sentiment is picking up quite a bit and perhaps prices may push above the US$50 mark in the next couple of weeks, provided the dollar does not strengthen further." Dollar-denominated crude becomes more expensive for holders of rival currencies when the greenback strengthens.

The blazes around the oil sands hub of Fort McMurray in Alberta have meanwhile escalated, with about 8,000 workers ordered evacuated overnight.

Some 100,000 residents and oil workers had already been evacuated from Fort McMurray and its surroundings two weeks ago.

According to the Conference Board of Canada, oil production was reduced by 1.2 million barrels per day on average.

US energy inventory data released Wednesday may show that crude stockpiles in the world's biggest economy have dropped for a second week running because of reduced exports from across the Canadian border.

In Nigeria meanwhile, a major trade union on Tuesday vowed to defy a court injunction and press ahead with a national strike to protest against government rises in petrol prices.

This follows several arrests by troops after armed attacks on an offshore oil facility.

AFP