Business

Oil touches $48 as Fort McMurray fire evacuations add to global supply disruption

The price of oil has risen to a six-month high above $48 US a barrel due to a series of supply disruptions around the world.

Slowdowns in Canada's oilsands combine with shutdowns in Nigeria and Venezuela to limit supply

The price of crude oil has been rallying for about two weeks as a series of small supply disruptions have thrown the market into deficit territory. (Reuters)

The price of oil has risen to a six-month high above $48 US a barrel due to a series of supply disruptions around the world.

After the worst of the Fort McMurray fire appeared to be over last week, bleak news returned on Monday as the fire that has moved away from more populated areas to the south appears to be taking aim at oilsands facilities to the north.​

Syncrude says it has "about 100 employees remaining at our two sites to maintain the safety and stability of our operations, such as key utilities, until conditions allow for additional workers to safely return," a spokesperson said, adding that all other staff have been moved out to safety.

"Air quality at our operations for both Aurora and Mildred Lake, as well as camp facilities, are being measured regularly to ensure the safety of people in those areas."

Suncor has taken similar actions, which means between the two companies about 8,000 workers have been extracted from the area. And a camp run by TSX-listed Horizon North Logistics called Blacksand Executive has sustained "significant damage" the company said in a release.

Evacuations like that are knocking down oil output from Canada's oil patch, which is good news for crude prices.

The North American oil benchmark WTI traded hands as high at $48.60 US on Tuesday, it's highest level since last November, ultimately closed at $48.31 US, up 59 cents on the day.

Oil has been steadily climbing for two weeks as small outages in Nigeria, Venezuela and elsewhere have coupled with declining U.S. production, and Canadian oilsands output cut in half by wildfires in northeastern Alberta.

"I expect prices to take a shot at $50," said Carsten Fritsch, analyst at Commerzbank. "The outages in Canada and Nigeria alone are probably enough to leave the global oil market undersupplied at present."

"Globally, there are still a lot of supply disruptions and this comes on top of natural declines," said Olivier Jakob, oil analyst at Petromatrix. "It does bring forward the expected rebalancing in the second half."

The series of events prompted investment bank Goldman Sachs to reverse its earlier call for $20 a barrel oil, and now also thinks that crude will average $50 a barrel in the second half of this year.

"The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," the bank said, adding the world is consuming more oil every day than it produces for the first time since early 2015. That should help draw down record high oil stocks being kept in storage around the world.

That's good news for overleveraged oil companies that have been waiting for prices to recover for more than a year now. On Monday, Calgary-based Penn West warned it was in danger of defaulting on its loans as early as next month.

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With files from Reuters

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