The massive wildfire in the heart of Canada’s oil country is helping send crude prices higher.
Canada is the leading exporter of crude oil and natural gas to the United States, according to figures from the Energy Information Administration. S&P Global Platts, which tracks the energy industry, estimated that up to 820,000 barrels a day of crude oil production were disrupted by the fire.
Canada sends about 100 million barrels of crude and 240 billion cubic feet of natural gas per month to the U.S.
“It definitely is helping to boost the prices, although (the increase) is not that high considering the amount of crude that is being threatened,” said Jeff Mower of S&P Global Platts.
Benchmark U.S. crude rose 34 cents to $44.66 a barrel Friday in New York after earlier dropping by nearly 2 percent. Oil prices often spike when there is concern that production could be curtailed.
Mower attributed the restrained market reaction to high inventories of crude in the U.S., especially in the Midwest, where much of the Canadian crude goes for refining.
Suncor Energy, Royal Dutch Shell and Husky Energy are among companies that shut plants or reduced production due to the raging wildfires in Fort McMurray.
It’s the latest blow to Alberta, already grappling with the economic toll of a two-year oil price slump in one of the world’s most expensive places to extract crude. More than 40,000 energy jobs have been lost in Canada since the price crash began in 2014, pushing the provincial economy into recession.
More than 80,000 people have left Fort McMurray, where the fire has torched 1,600 homes and other buildings.
So far there are no reports of damage to production facilities. Most of Alberta’s oil and gas facilities have their own firefighting crews and have physical defenses against wildfires, such as gravel fields and fire breaks, said Chad Morrison, a senior wildfire manager for the Alberta government.
“They’re highly trained and have great emergency response plans in place,” he said. “This is a dynamic, challenging, extreme fire, so many things can happen. But at this point, the prediction for the next two days is for the fire to move away to the northeast.”
Key pipelines were closed Thursday, and a major one reopened Friday morning, according to analysts for Genscape, which monitors the pipelines. Much of the oil from the tar sands is refined in the U.S., including at the Suncor plant in Commerce City. The impact on the U.S. oil market will depend on how long the interruption lasts.
If facilities are not damaged, “then the production cuts are only as long-lasting as the fires,” said Dylan White, an oil storage analyst with Genscape. “Once the fires are subdued, workers can come back to the production sites.”
Ritterbusch and Associates, which advises oil traders, said that such a short-term outage shouldn’t have much effect on oil prices because of a huge surplus of U.S. crude supplies.
