Oil Slides as Investors Focus on Canada Fires Recovery

NEW YORK: Oil prices tumbled on Monday (May 9) as the worst of the wildfire threat to oil-sands production in Canada seemed to be over and traders turned their focus to a looming output recovery.

Rain and cooler temperatures slowed the spread of the fires that have raged in western Canada’s Alberta region for more than a week, spurring oil companies to shut down operations.

“It doesn’t seem the fires in Canada did any lasting damage to capacity production,” said Kyle Cooper of IAF Advisors. “As soon as they are controlled it seems they could quickly get back to work.”

US benchmark West Texas Intermediate for delivery in June fell US$1.22 on the New York Mercantile Exchange, finishing at US$43.44 a barrel.

In London, Brent North Sea crude for July delivery, the European benchmark, closed at US$43.63 a barrel, down US$1.74 from Friday’s settlement.

An estimated one million barrels per day of production in the Alberta region remained offline, said Tim Evans of Citi Futures. “There is talk now that some operations could resume as early as next week,” he said.

The wildfires had helped lift oil prices last week on the prospect of reduced supplies.

“The failure of the crude oil market to make new highs off the outage is helping to underscore the extent to which the market may have been overvalued, and vulnerable to correction,” Evans said.

Traders also digested Saudi Arabia’s surprise replacement of oil minister Ali al-Naimi, who had been in his post for two decades, with a close ally of Deputy Crown Prince Mohammed bin Salman.

Khaled al-Falih, the longtime head of state oil giant Saudi Aramco, was appointed his successor, part of a major government reshuffle as Saudi Arabia, OPEC’s largest oil exporter, moves to transform the economy by reduce its dependence on oil.

Evans predicted the new oil minister would make no abrupt change in policy. “That said, the move likely does consolidate the case for the current path, with Saudi Arabia looking to compete for market share in the oil market, even as it attempts to restructure its entire economy,” he said.

Courtesy : channelnewsasia.com