Oil prices rose about three per cent on Tuesday, recovering most of the previous session’s losses, as supply disruptions of 2.5 million barrels per day in Canada and elsewhere offset concerns about growing record high U.S. crude stockpiles.
The U.S. government’s forecast of higher oil demand for this year was also supportive, traders said, although the rally in crude was likely to prevent production from falling as sharply in 2017 as predicted earlier.
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 oil town Fort McMurray has knocked out an estimated 1.6 million bpd, consultancy Energy Aspects stated. Repair crews on were assessing the damage on Tuesday 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. (2130 GMT), was expected to show a half 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 per cent or more.
This year’s rebound in oil markets has been one of the strongest since the financial crisis, with prices rallying nearly 80 percent from multiyear lows under $30 in the first quarter, supported by falling U.S. production, supply constraints in Libya and the Americas and a weak dollar.
Since the end of April, however, the rally has stalled at around $45.
Brent crude futures LCOc1 were up $1.60, or 3.6 per cent, at $45.23 per barrel by 1:35 p.m. EDT (1735 GMT). It had fallen 3.8 per cent on Monday.
U.S. crude’s West Texas Intermediate (WTI) futures CLc1 rose $1, or 2.2 per cent, to $44.44.
Gasoline RBc1 gained two per cent and ultralow sulfur diesel HOc1, or heating oil, three per cent, after both fell four per cent in the previous session.
The U.S. Energy Information Administration stated domestic oil production will fall by 830,000 barrels per day (bpd) in 2016, in line with previous expectations. But it stated the decline will likely slow to 410,000 bpd in 2017, rather than the 560,000 bpd previously forecast, due to higher crude prices.
The EIA also lifted by 0.5 percent its demand forecast for oil in the second quarter of 2016 to 19.58 million bpd, and revised upwards by 0.1 percent its growth forecast for the whole year to 19.54 million bpd.
Guardian