Oil prices rose about three per cent yesterday, recovering most of the previous session’s losses, as supply disruptions of 2.5 million barrels per day in Canada and elsewhere offset concerns about growing record high U.S. crude stockpiles.
The U.S. government’s forecast of higher oil demand for this year was also supportive, traders said, although the rally in crude was likely to prevent production from falling as sharply in 2017 as predicted earlier.
A series of attacks on Nigeria’s oil infrastructure has pushed crude output close to a 22-year low in Africa’s largest oil producer, Reuters data showed.
In Canada alone, a wildfire that scorched a sizeable part of Alberta’s oil town Fort McMurray has knocked out an estimated 1.6 million bpd, consultancy Energy Aspects said. Repair crews on were assessing the damage on Tuesday as nearby oil sands companies looked to resume production.
The disruptions eclipsed worries about rising U.S. crude inventories, which were expected to have grown for a fifth straight week last week to record highs above 543 million barrels.
Data from the American Petroleum Institute was expected to show a half million-barrel build.
“I think we are still in bull market, but I also think the headwinds are increasing,” Scott Shelton, energy broker with ICAP in Durham, North Carolina, said, referring to the heightened volatility in crude futures since April’s rally of 20 percent or more.
This year’s rebound in oil markets has been one of the strongest since the financial crisis, with prices rallying nearly 80 per cent from multiyear lows under $30 in the first quarter, supported by falling U.S. production, supply constraints in Libya and the Americas and a weak dollar.
Since the end of April, however, the rally has stalled at around $45.
Brent crude futures were up $1.60, or 3.6 per cent, at $45.23 per barrel. It had fallen 3.8 per cent the previous day.
U.S. crude’s West Texas Intermediate (WTI) futures rose $1, or 2.2 per cent, to $44.44.