Oil rises on supply loss from Canada and falling US crude stocks

London — Oil prices rose on Wednesday on supply disruption in Canada, falling US crude stocks, uncertainty over Libyan exports and US demands that importers stop buying Iranian crude from November.

Brent crude was up 25c a barrel at $76.56 by 10am GMT. US light crude was 65c higher at $71.18.

“The worry is whether ‘Opec-Plus’ will have enough spare capacity to balance potential declines in oil production,” said Abhishek Kumar, senior analyst at Interfax Europe in London.

A supply outage at Syncrude in Canada has locked in 350,000 barrels per day (bpd) of crude, with repairs expected to last at least through July. The fall in Canadian exports has helped drain supplies of heavy crude across North America and contributed to a major draw in US crude oil inventories, according to analysts.

The American Petroleum Institute (API) reported a much higher than expected 9.2-million barrel fall in US crude inventories in the week to June 22 to 421.4-million barrels. Analysts polled by Reuters had estimated, on average, that crude stocks would fall 2.6-million barrels last week.

Also keeping markets on edge was the risk of a disruption to supplies from Africa and the Middle East. In Libya, a power struggle between the internationally recognised government and rebels has left it unclear who will handle the country’s oil exports.

The future of Iranian crude exports is also unclear. The US has told all countries to stop importing Iranian oil from November, as the Trump administration ramps up pressure on the Islamic Republic.

Trying to make up for disrupted supply, oil cartel Opec said last week it would increase output. Saudi Arabia plans to pump a record 11-million bpd in July, up from 10.8-million bpd in June, an industry source familiar with Saudi plans told Reuters on Tuesday.

Despite widespread international opposition to the US stance on Iran, Opec’s third biggest producer, analysts expect a significant reduction in its exports, perhaps in excess of 1-million bpd. Iran pumped 3.8-million bpd in May, Reuters’ monthly survey showed.

Goldman Sachs said the planned unilateral US sanctions against Iran would likely have a “high level of efficiency”.

Risk consultancy Eurasia Group said it was “very unlikely” that the US would succeed in ending Iranian oil sales as fast as it hoped, but it said: “We are increasing our estimate of oil likely to come off the market by November to about 700,000 bpd — another bullish factor for prices.”

Reuters