Oil prices have risen as the massively destructive wildfire in Alberta, Canada knocked out over one million barrels in daily production capacity.
The actual energy facilities near Fort McMurray have escaped major damage from the flames, but the restart of pumping is likely to be significantly delayed because many essential oil industry workers have been evacuated from the area.
“It’s the human element,” said Mark Routt, chief economist for the Americas at KBC Advanced Technologies in Houston.
“When you have an operator and his family needs to be evacuated, the plant may be in good shape, but what is the operator going to do? Humans have to operate the plant, too.”
Routt estimated production will be shut for at least two to three weeks.
The lost capacity is equivalent to near half of Canada’s typical daily oil sands output, most of which is exported to the United States. Alberta’s vast oil sands are the world’s third-largest crude reserves.
The fire, which broke out on May 1, has forced three major oil firms to warn they will be unable to deliver on some contracts for Canadian crude.
On Friday, BP, which produces oil in Canada via a partnership with Husky, along with Suncor Energy, the largest Canadian oil producer, and US refiner Phillips 66 issued warnings of “force majeure” events.
A force majeure event is an unforeseen event that prevents a party from fulfilling a contract.
World oil supply remains in a glut, with an estimated oversupply of around 1.5 million bpd.