Oil up on Canada wildfire, dollar; big weekly loss for Brent

Oil prices edged up on Friday, supported by an early dip in the dollar and a wildfire that has shrunk Canadian oil sands crude output by a third, but Brent still ended with its sharpest weekly drop in four months as investors cashed out of April’s big rally.

Reports of a militant attack on a Chevron platform in Nigeria’s oil-rich Niger Delta region and a drop in the number of U.S. oil drilling rigs also helped lift prices on the day.

The dollar, which has a huge impact on greenback-denominated commodities such as oil, was down most of the day before recovering in late trade. The dollar dipped after the U.S. government reported that the economy added the fewest number of jobs in seven months in April, raising doubts about whether the Federal Reserve will raise interest rates before the end of the year.

Brent crude futures settled up 36 cents, or 0.8 percent, at $45.37 a barrel.

West Texas Intermediate (WTI) futures finished up 53 cents, or about 0.8 percent too, at $44.66.

For the week, Brent slid 6 percent for its biggest weekly decline since January. WTI fell 3 percent. The drops came after profit-taking by investors early in the week on April’s gain of 20 percent or more in the two crude benchmarks.

“The global surplus still exists and there is still a possibility that oil prices could retrace further,” said Dominick Chirichella, senior partner at the Energy Management Institute.

“However, the market is trading more and more in sync with the forward-looking or perception view, with the current bearish fundamentals mostly priced into the market.”

At least 720,000 barrels per day (bpd) of Canada’s crude production capacity remained offline as the wildfires ravaged the oil town of Fort McMurray in Alberta and forced evacuation of workers and precautionary production cuts or shutdowns at about a dozen major facilities.

While most of the oil sands are to the north of the city, CNOOC Nexen’s Long Lake facility and Athabasca Oil’s Hangingstone project are south of Fort McMurray and were in danger, according to emergency officials. Both facilities have been evacuated.

The U.S. oil rig count, compiled by oilfield services provider Baker Hughes fell by four this week, extending a decline to a seventh week and the lowest level since October 2009.

Some analysts said oil output in the Americas is declining so fast that it looks like the region alone could resolve the global oversupply.

“Unplanned oil supply disruptions have been a key element so far this year that have contributed to a tighter oil market than was otherwise expected,” said analyst Guy Baber of Simmons & Co.

Source: Reuters