Oil prices jumped on Thursday as a huge wildfire in Canada disrupted oil sands production, while escalating fighting in Libya threatened the North African nation’s output.
International benchmark Brent crude futures were trading at $45.36 per barrel at 2.54 a.m. ET, up 74 cents or 1.7 percent from their last close, after three days of declining prices.
U.S. West Texas Intermediate (WTI) crude futures were up 95 cents, or 2.2 percent, at $44.73.
Traders said WTI prices were being driven up by an uncontrolled wildfire in Canada that disrupted oil production in the province of Alberta.
A massive wildfire has forced the evacuation of all 88,000 people in the western Canadian oil city of Fort McMurray and burned down 1,600 structures, and has the potential to destroy much of the town, authorities said.
With evacuees being told to head north toward Alberta’s oil sand fields, and some pipelines in the region being shut as a precaution, output at several facilities has been disrupted, although the volume of the decline was unclear.
CNOOC Nexen said it was shutting down its 72,000 barrels per day (bpd) bitumen facility at Long Lake because of the fire threat.
Brent was pushed higher by escalating fighting in Libya.
Libya’s already crippled oil production is at risk of further disruption from a stand-off between eastern and western political factions, which prevented a Glencore cargo from loading.
A Tripoli-based official warned the country’s oil output could fall by 120,000 bpd if the Benghazi-based National Oil Corporation (NOC), set up by the rival eastern government, continues to block tankers loading for Tripoli from the eastern Marsa el-Hariga port.
Libya’s output has already fallen to less than a quarter of its 2011 high of 1.6 million bpd.
Investment firm ETF Securities said that unplanned outages within the Organization of the Petroleum Exporting Countries (OPEC), including Libya, stood above 2 million bpd, the highest in at least five years.
Adding to these disruptions, U.S. production continues to fall, with the latest official figures showing a decline by over 8 percent since mid-2015 to 8.825 million bpd.
“Investor optimism for oil has markedly improved. We believe the gains in price are sustainable and not just driven by speculative gains. We are likely to be in a global oil supply deficit by Q3 2016,” said Nitesh Shah, director of commodity strategy at ETF Securities.
Dutch bank ABN Amro said it had an “expectation of a further normalizing of the market balance between supply and demand, resulting in higher oil prices.”
This optimism came despite another surge of 2.8 million barrels in U.S. commercial crude inventories to a fresh record of 543.394 million barrels.