Oil prices slip as Canada fires ebb

An aerial view of Highway 63 south of Fort McMurray, Alberta. Canada, shows smoke from the wildfires taken from a CH-146 Griffon helicopter May 5, 2016. MCPL VanPutten/Canadian Armed Forces/Handout - photo source Reuters

NEW YORK: Oil prices slipped on Friday (May 20) as the forest fires menacing Canada's oil sands region were contained, but the market remained generally firm amid growing expectations of a demand pickup.

US benchmark West Texas Intermediate for delivery in June lost 41 cents to close at US$47.75 a barrel.

In London trade, Brent North Sea crude for July lost nine cents to US$48.72 a barrel.

Both contracts though were up from a week ago, when WTI closed at US$46.24 and Brent at US$47.78.

Traders showed rising confidence in a tightening of the supply-demand equation, with US output steadily falling, Nigeria and Canada suffering cutbacks, and some tentative signs of stronger growth in the global economy.

"There's still a lot of fundamental news that's pretty bullish: the wildfires in Canada, the chaos in Venezuela," said market analyst Carl Larry of Frost & Sullivan.

"Demand has started to outstrip supply. Sentiment is picking up quite a bit and perhaps prices may push above the $50 mark in the next couple of weeks, provided the dollar does not strengthen further," said IG analyst Bernard Aw.

In Fort McMurray, the center of Canada's oil sands production, officials said Friday that firefighters have contained the blaze that forced the shutdown of 1.2 million barrels a day of output.

But they said thick smoke in the area would continue to hamper the resumption of output.

The two largest oil sands facilities, operated by Suncor and Syncrude, remain shuttered.

"They remain under mandatory evacuation," said Shane Schreiber, head of the Alberta Emergency Management Agency.

"I can't see that being lifted until the air quality index becomes stable and until we get a couple more days of getting good firefighting done on that fire," he said.

Imperial Oil, meanwhile, said in a statement that it has resumed limited operations at its Kearl oil sands site, 70 kilometres (44 miles) north of Fort McMurray.