The U.S. Dollar is stronger again this morning, but that isn’t slowing down any part of this market. Reports of the Canadian wildfires moving away from the oil sands caused the market to tank yesterday and today it is recovering in a big way. As of 12:30 PM EST, diesel is up $.0450, gas is up $.0325, and crude is up $1.05, reaching a high of $44.58 today. In addition to the production outages in Canada, which are estimated between 1 and 1.6 million barrels per day, there are also supply disruptions in Nigeria and Libya which are helping this surge today. There were signs of hope yesterday for consumers with the market reaching the high $1.20’s on diesel for the first time in over a month, but supply disruptions put a damper on it this Tuesday.
Just because the situation in Canada has improved or is improving, doesn’t mean the global oil supply (in a broad scheme) will not be affected. At the end of May, it will not be surprising to learn that the wildfires in Canada will have caused an overall average loss of at least 500,000 barrels per day of production for the month. These supply disruptions are coming at an important time regarding oil storage. Cushing, Oklahoma was seeing only 7 million barrels of available capacity back in the week ending on April 29th. That scenario was bearish to say the least and now that seems unlikely because of Canada’s setback. Overall, Canada’s wildfires can affect the market on a global scale and other supply disruptions can strengthen that. Speaking of a fall in production, Libya is also a victim to decreased production because of issues between the two rival governments. That is more of a political interruption, whilst Canada’s was unavoidable.
- In Libya the Eastern government has effectively made it impossible for tankers to load, cutting the country’s production down to 100,000 bpd.
- Oil workers were evacuated in the Niger Delta due to spread of violence.
- Iran June OSP to Asia is at the biggest discount to Saudi and Iraqi crude oil.