Singapore | Oil traders moved cautiously in Asia Tuesday after the previous day’s sharp losses as the threat of wildfires to Canada’s crude-producing Alberta region eased and a strong greenback dampened appetite.
Canadian authorities were focusing on restoring output after the fires that have raged for a week forced oil companies in the area to shut down operations, slashing production by one million barrels a day. Alberta’s premier toured the most affected town of Fort Murray – gateway to the world’s third largest reserves – yesterday and said it was largely intact despite the damage from the wildfires which forced tens of thousands of residents to evacuate.
At around 0900 IST, US benchmark West Texas Intermediate for delivery in June was down 11 cents, or 0.25 per cent, at USD 43.33 and Brent crude climbed seven cents, or 0.16 per cent, at USD 43.70.
Yesterday WTI dived 2.7 per cent and Brent plunged 3.8 per cent. A literal change in the way the wind is blowing in Canada’s oil sands region (is) alleviating concerns over production cuts due to the wildfire, said Margaret Yang, an analyst with CMC Markets in Singapore. A stronger US dollar also played a role in suppressing commodities price, she said in a note.
Oil is traded in dollars, meaning a stronger greenback makes it more expensive for holders of other units. Traders were also watching developments after Saudi Arabia’s surprise replacement of veteran oil minister Ali al-Naimi with a close ally of Deputy Crown Prince Mohammed bin Salman. Khaled al-Falih, the longtime head of state oil giant Saudi Aramco, was appointed in a major reshuffle in OPEC’s largest oil exporter, which is moving to transform the economy by reduce its dependence on crude. The change of guards came ahead of a meeting next month of the Organization of the Petroleum Exporting Countries and followed a failure last month by major producers to agree on freezing output despite a global supply glut. The appointment of a new Saudi oil minister has made the June OPEC meeting less clear to investors, as the representative of the world’s most powerful producer of oil has mentioned that keeping output high is the best strategy for the kingdom, Yang noted.
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