The price of oil is climbing on Monday as huge wildfires in rural Canada continue to hit supply from the country’s vast oil sands reserves.
UK Brent oil is up 1.19% to $45.91 at 7.25 a.m. GMT (2.25 a.m. ET) and US West Texas Intermediate is up 1.77% to $45.45.
CMC Markets chief market analyst Michael Hewson has a neat summation of why prices are higher, sent in an early morning email:
Despite the lacklustre nature of Friday’sUS data and broader economic data in general oil prices continue to remain fairly resilient on an expectation that a tightening of supply will eventually happen. The expectation that the Alberta fires could rage for months, potentially affecting output, along with a change in the top of the Saudi Arabian oil ministry and a report that new oil discoveries are down at a 60 year low has helped underpin prices.
Canada is suffering a devastating wildfire that authorities are struggling to get to grips with and has forced 80,000 out of their homes. While the human cost is the biggest concern, there are consequences for the oil market too as the fire is stopping production in Canada.
“Our understanding is that up to 800,000 barrels a day of production has been (or is in the process of being) shut down,” analysts at Energy Aspects said on Thursday, when the wildfires were already driving prices in the oil market.
The second factor is the appointment of Khalid al-Falih as Saudi Arabia’s new oil minister. The chairman of the state-owned oil company Saudi Aramco replaces 20-year veteran Ali al-Naimi. al-Falih is a key ally of 30-year-old Deputy Crown Prince Mohammed bin Salman, who is driving forward the Vision2020 plan to rebalance Saudi Arabia’s economy away from oil. This suggests al-Falih may be more accommodating on prices.
Consultancy IHS also reports on Monday that the discovery of new oil reserves is at a 60-year-low, as first reported by the Financial Times. This points to a further looming supply crunch that could drive up prices.
Here’s how oil looks this morning: