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Oil prices up as Canada wildfires threaten crude output
[SINGAPORE] Oil prices climbed in Asia on Thursday with Brent breaching US$45 a barrel as raging wildfires threatened to cut Canadian output and a decline in US crude production also boosted the commodity.
Authorities say wildfires are burning out of control in the Alberta oil sands region of Canada, which mines and ships heavy crude south to the US market, and oil companies have reduced operations to facilitate the evacuation of non-essential employees.
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 barrels per day, 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 the global supply glut.
At around 0240 GMT, US benchmark West Texas Intermediate for delivery in June was up 96 cents, or 2.19 per cent, at US$44.74 and Brent crude for July climbed 80 cents, or 1.79 per cent, to US$45.42 a barrel.
"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." BMI Research said it expects US shale oil production to continue to decline over the long term and this should help ease the market oversaturation.
"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 oversaturation that has led prices to plunge over 60 per cent from peaks of more than US$100 in mid-2014.
Mr Aw said however that the market remains brimming with oil and "it is foolhardy to think that the supply glut issue is going away any time soon".