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Wednesday, August 17, 2022

Oil up 3 percent; Canada, Nigeria outages offset U.S. stockbuild worry

By Barani Krishnan

NEW YORK (Reuters) – Oil prices rose about 3 percent on Tuesday, recovering a chunk off losses from the previous session, as supply disruptions of 2.5 million barrels per day in Canada and elsewhere offset concerns about growing record high U.S. crude stockpiles.

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 oiltown Fort McMurray has knocked out 1.6 million bpd from producers and pipeline operators that have shut facilities as precaution, consultancy Energy Aspects said.

Repair crews on Tuesday were assessing the damage after an initial inspection by officials showed the Canadian energy boomtown was spared the worst 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, due at 4:30 p.m., was expected to show a half a 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.

Brent crude futures were up $ 1.40, or 3.2 percent, at $ 45.03 per barrel by 11 a.m. EDT (1500 GMT). On Monday, it fell 3.8 percent.

U.S. crude’s West Texas Intermediate (WTI) futures rose 87 cents, or 2 percent, to $ 44.31.

Refined products were also firmer, with U.S. gasoline futures gaining 2 percent and ultralow sulfur diesel, also known as heating oil, soaring 3 percent. Both had fallen about 4 percent in the previous session.

Macquarie said in a research note that with crude production in decline in the United States and outside the Organization of the Petroleum Exporting Countries, global oil markets could be on the path to rebalance by end 2016.

“With firmer Q4/Q1 activity driving these observed declines, we remain confident that activity levels will need to rise and WTI prices will need to stay above $ 40 for U.S. land production to stabilize in a timely manner,” it said.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy)

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