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Oil stable as production outages offset impact of stronger dollar
[SINGAPORE] Oil prices were steady on Friday after a run up on supply disruptions, especially in the Americas, where wildfires continue to rage near Canada's huge oil sand fields, tightening a market suffering global oversupply.
The disruptions helped offset the impact of a stronger dollar this week, which potentially reduces demand for crude as it makes dollar-traded imports more expensive for countries using other currencies.
International benchmark Brent crude futures were trading at US$44.95 per barrel at 0203 GMT, 6 cents below their last settlement but flat with its first close this week.
US West Texas Intermediate (WTI) crude futures were at US$44.17, down 15 cents but over 1 per cent above this week's first close. "Supply disruptions and closures helped push crude oil prices higher, despite the stronger US-dollar," ANZ bank said on Friday.
A massive fire around the Canadian oil city of Fort McMurray has forced the evacuation of all its residents and the closure of 690,000 barrels per day (bpd) worth of production out of Canada's total oil sands output of 2.2 million bpd.
Adding to the production outage in Canada is an ongoing decline in US output. "While the wildfire in the oil-sands regions of Canada is still wreaking havoc with many producers, US oil output continues to feel the impact of low prices," ANZ said.
Data by the US Energy Information Administration (EIA) shows that U.S. crude oil output has fallen by 410,000 bpd this year, and by 800,000 bpd since mid-2015, as many producers succumb to a rout that saw prices tumble 70 per cent between mid-2014 and early-2016.
Analysts said that the hits to North American output, combined with disruptions in Latin America, were contributing to a fast erosion of global oversupply that peaked as high as 2 million barrels bpd last year.
"Unplanned oil supply disruptions have been a key element so far this year that have contributed to a tighter oil market than was otherwise expected," said analyst Guy Baber of Simmons & Co.