Canada Wildfires Trigger More Oil Gains As Supply Concerns Take Hold

Meanwhile, Trump's sanctions against Venezuela are having minimal effect: File Image/Pixabay 

Oil on Tuesday extended its gains as concerns over the latest bumper increase from the Organization of the Petroleum Exporting Countries (OPEC) were somewhat mitigated by supply disruptions from Canada.

Specifically, wildfires in Canada's west shut down almost 350,000 barrels per day (bpd) of crude production, just 60,000 barrels less than the amount of oil OPEC agreed over the weekend to add to the market.

As a result, Brent settled up $1 at $65.63 per barrel, while West Texas Intermediate settled up 89 cents at $63.41.

Ritterbusch and Associates said in a note, "Risk premium has ramped up this week as the prospect of a Russia/Ukraine ceasefire as well as an Iranian nuclear deal now appear to have been pushed back for weeks if not months."

The consultancy was referring to recent attack and counterattacks between Moscow and Kiev, and U.S. president Donald Trump stating emphatically that he will not allow Tehran to enrich uranium.

Still, Tuesday's gains were likely short lived, given the persistent bearish attitude of traders and analysts.

"Beyond the near-term, we continue to expect that crude markets will struggle to absorb OPEC barrels over the coming months as Gulf exports are more likely set to rise following peak seasonal demand for the region," said Daniel Ghali, a commodity strategist at TD Securities.

Still, bullish sentiment continued to creep into the gloomy narrative, thanks to the American Petroleum Institute predicting on Tuesday that U.S. crude stockpiles declined for a second week by 1 million barrels; official data will come from the Energy Information Administration on Wednesday.

In other oil news on Tuesday, shipping data and internal documents from state-run PDVSA showed that Venezuela shipped 779,000 bpd of crude and refined products last month, just a slight decrease from April's 783,000 bpd.

While exports to western firms such as Chevron and Reliance halted under U.S. sanctions against Venezuela, China cargoes surged to 584,000 bpd, up from 521,000 bpd in April.