Crude prices ticked higher on Friday as Canadian oil sands producers cut back more output due to the massive Canadian wildfire around Fort McMurray, Alberta.
The spreading fire seems not to have directly damaged oil sands mining sites, but evacuations of more than 100,000 people in the area have forced companies to slash production.
“It is now estimated that up to 1 million barrels per day of Canadian production has been taken offline,” Matt Smith of ClipperData said.
Photo: Reuters
US benchmark West Texas Intermediate for delivery in June rose US$0.34 to US$44.66 a barrel on the New York Mercantile Exchange.
In London, Brent North Sea crude for July closed at US$45.37 a barrel, up US$0.36 from Thursday’s settlement.
West Texas Intermediate lost nearly 3 percent over the course of the week, snapping four straight weekly gains, and Brent shed more than 4 percent.
Smith said that Canada produces about 4 million barrels a day of crude oil, and about 80 percent of it is produced in Alberta, where output is largely from oil sands. Most of that is piped to the US market.
“While infrastructure is yet to be damaged, the evacuation of staff in combination with the precautionary closure of pipelines is what is driving the drop in production,” Smith said.
Tim Evans of Citi Futures said the mounting production losses in Alberta continued to give the market key near-term support, but that could evaporate swiftly if output is restored quickly.
“Traders may not want the risk that the fire threat diminishes by Monday, allowing output to recover,” he said.
Militants’ attack on an offshore Chevron facility in Nigeria, Africa’s largest oil producer, also drew traders’ attention.
“The drop in Nigerian oil production is also getting some play in the press, although we note that the decline wasn’t enough in April to do more than limit the increase in overall OPEC supply,” Tim Evans of Citi Futures said.
PRECIOUS METALS:Gold had the biggest gain in a week after US employers added the fewest workers in seven months, weakening the case for the US Federal Reserve to raise interest rates.
The 160,000 gain in payrolls last month followed a revised 208,000 rise in March, a US Department of Labor report showed on Friday.
The median forecast in a Bloomberg survey called for a 200,000 April advance. The jobless rate, projected to ease, stayed at 5 percent.
Bullion futures climbed 22 percent this year in the best start since 2006, helped by speculation that the US central bank will be slow to tighten monetary policy. Low borrowing costs are a boon to gold because it does not offer yields or dividends. Odds that the Fed will raise rates next month dropped to 6 percent, from 10 percent on Thursday and 75 percent at the beginning of the year, based on Fed-fund futures data.
“The jobs number was a devastating blow to the people who believe that a June rate hike is on the table,” Chicago-based RJO Futures senior market strategist Phil Streible said in a telephone interview. “Now the chances have declined significantly, and as a result, gold and silver are moving up and should move through their previous highs.”
Gold futures for June delivery rose 1.7 percent to settle at US$1,294 an ounce at 1:50pm on the Comex in New York. The metal gained 0.3 percent this week.
Four regional Fed presidents on Thursday said that they were open to considering a rate increase in June if it is justified by economic data.
The smaller payrolls gain may show employers are adjusting in the wake of economic growth that has slowed for three straight quarters.
“The Fed says they are data-dependent, and these data are certainly not going to wow them,” New York-based Bank of Tokyo Mitsubishi UFJ Ltd chief financial economist Chris Rupkey said in an e-mail.
BASE METALS: Copper dropped to the lowest in more than two weeks as metals retreated on concern that weak demand in China, the world’s largest user, points to persistent supply gluts.
China is set to cut copper imports from a record high as swelling stockpiles discourage purchases, analysts at firms including Macquarie Group Ltd and Jinrui Futures Co said.
The nation’s refined-copper output will probably hold close to last year’s levels, as output cuts pledged in December last year are offset by new capacity, according to the country’s biggest smelter.
“That supply imbalance is getting aggressive,” Chicago-based Long Leaf Trading Group Inc chief market strategist Tim Evans said in a telephone interview. “We’re not dealing in a very robust economic period. Copper is obviously is a good barometer of growth, and given the recent numbers that we’re having, copper is taking the brunt of it.”
Copper for delivery in three months slipped 1.7 percent to settle at US$4,785 a tonne at 5:51pm on the London Metal Exchange, after touching US$4,767, the lowest since April 18. Aluminum, lead, nickel, tin and zinc also fell.
Copper posted the biggest monthly gain in a year in April as signs of stabilizing manufacturing in China and the US boosted speculation that demand would rebound. The metal headed for a third straight loss on Thursday.
“We got ahead of ourselves and we didn’t rally on fundamentals,” London-based Societe Generale SA analyst Robin Bhar said by telephone. “We rallied on speculative activity on the back of frenzied activity in China. That’s why the rally is now petering out like this.”
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