The wildfires raging in Canada have offered one silver lining, at least for those with a stake in the oil business. The commodity’s price jumped Monday, with the international benchmark Brent crude rising 1.06 percent for July cargoes to $45.85 a barrel.
West Texas Intermediate, the benchmark U.S. crude, rose 1.57 percent Monday to $45.36 a barrel for June cargoes.
The rise extends a rally that has been underway for most of the calendar year. Since hitting a low of $31.94 on Jan. 20, 2016, West Texas Intermediate, the benchmark U.S. crude, has risen 41.9 percent.
Since the fires began, three major companies have said they may not be able to deliver on certain contracts.
Beside the fire-related production cuts in Alberta, Canada, strong crude imports in China also helped drive the rally, all despite a shake-up in Saudi Arabia, the world's largest exporter of crude. The country replaced its long-standing energy minister Saturday with Khalid al-Falih, chairman of Saudi Aramco, generating uncertainty in oil markets.
Wildfires broke out near Alberta's oil sands on May 1. Estimates of losses in oil production vary. Official estimates say at least 645,000 barrels a day of output from the oil sands have been halted, constituting more than a quarter of the country's 2.5 million daily barrels of production. Other calculations put the figure higher, at more than 1 million barrels in daily production capacity, or more than one third of Canada's standard daily production.
“The market is close to balanced ... when we consider the large amount of supply offline in Canada and elsewhere,” investment banker Morgan Stanley said.
In China, crude imports rose 7.6 percent year-on-year in April to more than 7.9 million barrels a day. In the first four months of 2016, it imported 123.67 million tons of crude, a 12 percent jump from the same period last year. The growth is frequently attributed to demand from smaller, independent buyers dubbed "teapot refineries" that the government recently granted freer rein to import oil directly.
“This is giving the market hope that China’s appetite for crude will remain elevated at a time when the world is flooded with oil,” Ben Le Brun, an energy analyst OptionsXpress in Sydney, told MarketWatch, speaking of the teapot refineries.
The Saudi shake-up, meanwhile, has left observers speculating about who is in charge of the oil-rich country's energy policy as it faces, along with other global produces, persistently low prices. Yet those anxieties were insufficient to quell Monday's rally.