Baku, Azerbaijan, May 10
By Aygun Badalova - Trend:
The wildfire in Canada, which has been spreading and is out of control now, is obviously the main reason for oil prices currently being higher, Ole Hansen, head of commodity strategy at Saxo Bank told Trend on May 10.
It is reducing production in Canada - it's therefore also reducing imports into the US, according to Hansen.
"That's going to help the slowdown in inventories over the coming weeks and months, which obviously will be a positive sign. Against this, we have the spread between WTI and Brent, which has now moved back in favour of WTI. When that happens we could potentially see increased imports come into the Gulf of Mexico. So on net-net we're not seeing a major positive impact of this fire because obviously it will be contained and we will see production pick up in US or Canada sooner or later," Hansen said.
He mentioned that WTI crude is currently in the $43.50-$46 range.
"Brent crude is probably more interesting as we're building a head and shoulder formation at the moment. It basically means that if we can break the neckline at the 44.20 we could see some additional downside," Hansen said.
"Likewise, if we move back above 46.75 there will be some additional buying coming into the market, so at this stage I'll probably be watching those two major levels play the range, but buy on a 46.75 break and sell on a 44.25 or 44.20 break to the downside," he added.
Oil prices gained on Tuesday, with supply outages from Canada to Nigeria helping to alleviate the global glut of crude, the Wall Street Journal reported.
Brent crude rose 1.4 percent to $44.26 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, WTI futures were trading up 0.8 percent at $43.80 a barrel.
Wildfires in Canada's oil-rich Alberta province have knocked off some 1.6 million barrels a day according to consultancy Energy Aspects. Several companies including Suncor, BP, and Phillips 66 have declared force majeure on Canadian crude.
With regard to the news over the weekend from Saudi Arabia that a new oil minister has been appointed, Hansen said that is going to be business as usual.
"They will still be quite hawkish, still looking to favour market share over price and that will not lead to any major change in the near-term," Hansen said.