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Oil prices were marginally higher on Monday’s trading session on rising belief that the U.S. will avoid a default. Front-month Nymex crude oil (CL1:COM) for June delivery was up 0.65% to $72.17/bbl at 1215 Hrs ET while front-month July Brent crude (CO1:COM) gained 0.21 to trade at 1.9% on the week to $75.71/bbl.
Last week, both oil benchmarks gained ~2%, marking their first rise in five weeks, after wildfires shut in large amounts of crude supply in Alberta, Canada. The Canadian energy sector is reeling after the shutting in of at least 145,000 of oil equivalent per day (boepd) in the oil-rich province of Alberta due to wildfires more than a week ago.
The unprecedented fires have forced tens of thousands of Albertans to evacuate their homes.
More than half a dozen Canadian oil and gas companies including Paramount Resources (OTCPK:PRMRF), Crescent Point Energy Corp. (NYSE:CPG), Vermilion Energy Inc. (NYSE:VET), Pipestone Energy Corp. (OTCPK:BKBEF), Kiwetinohk Energy Corp. (TSX:KEC:CA),Tourmaline Oil Corp. (OTCPK:TRMLF) and Cenovus Energy Inc. (NYSE:CVE) have been impacted by the nearly 80 fires currently running amok in the province.
Over the short-term, oil's upside is expected to remain limited thanks to worries about a looming recession as well as concerns whether China's economy can provide evidence of a broader and more resilient recovery.
Thankfully, the longer term outlook is brighter with Francisco Blanch, head of commodities research at Bank of America, saying prices will reclaim the $80/bbl level in the latter half of the current year and could hit $90 due to a deepening supply deficit caused by OPEC's production cuts as well as low supply from U.S. shale.
"Demand will eventually turn around and get a little better in the developed markets, [and] start to push inventories lower again into the year-end and into 2024, and that's what gets you higher in terms of prices," Blanch said.
It’s a sentiment shared by the International Energy Agency (IEA), which has warned of a looming shortage in the second half when demand is expected to eclipse supply by almost 2 million barrels per day (bpd).
"I expect plenty of volatility in the coming days and a bounce upward in crude prices as and when a deal is reached to raise the debt ceiling," Vandana Hari, founder of oil market analysis provider Vanda Insights, has told Reuters
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.