Prices of crude oil climbed on Tuesday as supply disruptions in Canada and elsewhere which have reduced some 2.5 million barrels of daily production off the market outweighed concerns on overflowing inventories and impending refined glut supply.
Internationally traded Brent crude futures tacked on $44.10 per barrel, gaining 47 cents or 1 percent from their last session.
On the New York Mercantile Exchange, United States crude futures rose 21 cents to $43.65 per barrel, holding back more than Brent by record United States oil stocks.
Canadian officials got their first look on the oil sands town of Fort McMurray since a wildfire interrupted and knocked out large amount of crude production in the town, and they noted that almost 90 percent of its buildings were spared.
Despite the improving conditions, producers anticipate shutdowns as facilities like pipelines which were close to the wildfire need to be inspected while evacuees need to leave production plants before staff can come back.
Energy Aspects stated that outages in Canada totals to 1.6 million barrels per day which have pushed global disruptions to more than 2.5 million barrels per day since the start of 2016.
It has at least briefly erased a glut that emerged in 2014 and dragged prices down by around 70 percent before a recovery which began early this year.
Goldman Sachs forecasted a plunge in United States oil production by 650,000 barrels per day this year, while BMI Research expected that production in Asia would tumble by 4.9 percent in 2016, equal to 331,500 barrels per day.
Even if production output has been reduced, United States and Brent crude are down 2.3 percent and 2.8 percent respectively since last week’s close because of worries over glut supply in United States inventories, which are seen to reach records with the disruptions in Canada.
As stated by a market analyst, “Despite some significant supply disruptions, most notably in Canada, ongoing bearish fundamentals precipitated a modest retracement in prices.”
United States commercial crude stockpiles have likely grown for five consecutive weeks, with crude inventories anticipated to have built by 500,000 barrels to a record above 543 million barrels.
With large amount of crude supply available, refiners produced huge volumes of gasoline and diesel threatening to surpass demand despite the coming United States summer driving season.
According to an energy analyst, “Crude cannot go up without support from products, and that support is not there at the moment, and more refineries are coming out of turnarounds so there will be more products and tanks are getting full.”