“Oil prices could receive support from the wildfires in the Canadian oil province of Alberta”
LONDON, May 4 (Reuters) – Oil prices pared gains on Wednesday as a bigger than expected gain in U.S. crude stocks tempered concerns about reduced production in Canada’s oil sands region due to a wildfire.
U.S. crude stocks grew by 2.8 million barrels in the last week, versus expectations of a 1.7 million barrel build, Energy Information Administration data showed. Gasoline stocks also posted a surprise increase.
The development limited concerns over evacuations in the Canadian province of Alberta, where a wildfire took hold in the heart of the country’s oil sands region, prompting some companies to cut output.
“The crude build was obviously bigger than expectations,” said John Kilduff, partner at Again Capital Management in New York.
Brent crude was up 20 cents at $45.17 at 1653 GMT after trading as high as $46.01 earlier in the day. It reached a 2016 high of $48.50 on Friday, but settled lower on that day and fell again on Monday and Tuesday. U.S. crude was up 40 cents at $44.05 after trading as high as $44.88 earlier.
“Oil prices could receive support from the wildfires in the Canadian oil province of Alberta,” said Carsten Fritsch, analyst at Commerzbank.
Brent crude has fallen more than 5 percent from Friday’s high in response to rising output from the Organization of the Petroleum Exporting Countries, signs of economic slowdown in the United States and Asia, and a stronger dollar.
“It would not come as any surprise if speculative financial investors were to take profits against this news backdrop,” Fritsch added.
Canada’s Suncor Energy, whose oil sands operations are closest to the city, said its main plant north of Fort McMurray, was safe, but it was reducing crude production in the region to allow employees and families to get to safety.
While total OPEC output rose in April, outages around the world have been supporting prices. The Canada disruption adds to supply losses in Nigeria and Iraq, concern about renewed losses in Libya and fears that Venezuela’s cash crunch could hit the OPEC member’s output.
Some believe the rally has further to go in 2016 as the supply glut eases.
“Investor optimism for oil has markedly improved,” said Nitesh Shah of ETF Securities. “We believe the gains in price are sustainable and not just driven by speculative gains.”
But inventories, particularly the latest from the EIA, suggest supply is more than ample for now.
(Reporting by Alex Lawler and Libby George in London. Additional reporting by Henning Gloystein; editing by David Clarke and David Evans)