Oil Firms Warn of Output Cut After Canada Wildfires

Oil Firms Warn of Output Cut After Canada Wildfires

Three major oil firms have warned they will not be able to deliver on some contracts for Canadian crude, after wildfires ravaged the oil town of Fort McMurray in Alberta and forced evacuation of workers and precautionary production cuts or shutdowns at about a dozen major facilities.

British oil firm BP Plc said it had alerted customers to a “force majeure event” at one of its suppliers, which means several grades of Canadian crude oil will not be as readily available to its customers through the rest of May, Reuters reported.

Suncor Energy, Canada’s largest oil producer, said it had issued various force majeure notifications to customers, service providers and other third party contractors that will be affected by reduced operations in the region.

Trading sources said US refiner Phillips 66 had issued notice of force majeure on Canadian crude deliveries due to interruptions in third-party oil production in Canada’s oil sands.

The moves are likely to deepen concerns about tightening supplies of crude to US refiners as the nearly weeklong blaze rages on. A force majeure event is an unforeseen event that prevents a party from fulfilling a contract. The wildfires forced the evacuation of 88,000 people from Fort McMurray, located in the heartland of Alberta’s energy region, and resulted in the shutdown of about 1 million barrels per day in production, nearly half of Canada’s oil sands output.

At least 10 oil sands operators have reduced production as a result of the evacuations and emergency measures have complicated delivery of oil via rail, pipeline and highways.

The production cuts caused key Canadian crude prices to rally to their highest in months and boosted US futures this week.

The United States imports about 3.5 million barrels per day of Canadian crude, the largest supplier to one of the world’s biggest energy markets.

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