Oil prices dip on brimming crude stocks, Canada fires move away from oil sands
SINGAPORE: Oil prices fell early on Tuesday as Canadian wildfires that have knocked out over 1 million barrels worth of daily crude capacity moved away from production facilities, while brimming inventories and a strong US dollar weighed on markets.
US crude futures CLc1 were trading at $43.09 per barrel at 0040 GMT, down 35 cents from their last settlement.
Brent crude was down 26 cents at $43.37 a barrel.
"A reversal in the US-dollar will continue to weigh on commodity markets. With concerns easing over Canadian oil supply disruptions, crude oil could come under additional pressure," ANZ Bank said.
A stronger dollar, in which oil is traded, makes fuel more expensive for countries using other currencies, potentially hitting demand.
The dollar has jumped over 1.5 percent this month after falling by 7 percent against a basket of other currencies .DXY between January and April.
Canadian officials who got their first glimpse on Monday of the oil sands town of Fort McMurray since a wildfire erupted and knocked out over 1 million barrels of daily crude production capacity said almost 90 percent of its buildings were saved.
Despite the improving conditions, oil producers expect shutdowns of several weeks as facilities like pipelines that were close to the fires need to be inspected, while evacuees need to leave the production plants before staff can return.
Given that outages in Canada and around the world have eroded the 1-2 million barrels per day of crude oversupply, some traders said that a $50 price may resemble a newly balanced market as long as storage tanks remain as full as they are.
"It seems as if supply and demand have balanced, but there's still enormous amounts of crude available in storage. With that in mind, it almost looks like $45 to $50 Brent resembles a balanced, well stocked market," one trader said.
Traders said they were re-focussing on North America's brimming crude inventories despite the disruptions from Canada, which exports most of its crude to the United States.
US commercial crude stockpiles likely rose last week for the fifth straight week, a Reuters poll showed, with total US crude inventories seen to have built by 500,000 barrels to new record highs above 543 million barrels.
With plentiful crude available, refiners have produced large volumes of gasoline and diesel, threatening to overwhelm demand despite the upcoming peak summer US driving season.
If that happens, refiners will lower their output and cut orders for new crude feedstock, putting downward pressure on prices.