Oil prices increase in early trade

16 May 2023 , 08:34 AM

Early on Tuesday, oil prices increased for a second day as raging Canadian wildfires added to supply concerns and U.S. plans to buy oil for the Strategic Petroleum Reserve (SPR) provided support.

Brent oil futures were up 31 cents, or 0.4%, to $75.54 per barrel, while U.S. West Texas Intermediate crude was up 27 cents, or 0.4%, to $71.38 per barrel.

On Monday, both benchmarks increased by more than 1%, snapping a 3-session losing trend.

For delivery in August, the U.S. Department of Energy said on Monday that it will purchase 3 million barrels of crude oil for the SPR and requested bids by May 31.

Due to worries about a potential U.S. recession and the possibility of a historic government debt default in early June, Brent and WTI futures declined for a fourth consecutive week last week. In September 2022, the benchmarks last had a comparable run of weekly falls.

On Tuesday, though, supply concerns brought on by Canadian wildfires helped to strengthen oil prices.

At one point, more than 30,000 people were evicted from their homes due to the massive fires in Alberta, Canada, which also shut down at least 319,000 barrels of oil equivalent per day (boepd), or 3.7% of the country’s production.

As OPEC+, the Organisation of the Petroleum Exporting Countries and allies including Russia, prepare additional output cutbacks, the world’s crude supplies may also become more scarce in the second half.

On the other hand, according to data from the Energy Information Administration, U.S. oil production from the seven largest shale basins is expected to reach its highest level ever in June.

According to an internal planning document, the new administration of Venezuela’s national energy giant PDVSA plans to increase refining and exploration activities while raising the nation’s oil production to 1.17 million barrels per day (bpd) by year’s end.

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