Oil prices were steady on Tuesday as brimming inventories and a looming refined products glut offset supply disruptions in Canada and elsewhere that have taken more than 2 million barrels a day of production out of the market.
International Brent crude futures <LCOc1> were trading at $43.70 per barrel at 0315 GMT, up 7 cents from their last settlement.
U.S. crude futures <CLc1> were trading at $43.34 per barrel, down 10 cents.
Canadian officials who got their first glimpse of the oil sands town of Fort McMurray since a wildfire erupted and knocked out over 1 million barrels of daily crude production said almost 90 percent of its buildings were saved.
Despite the improving conditions, producers expect shutdowns of several weeks as facilities like pipelines that were close to the fires need to be inspected, while evacuees need to leave production plants before staff can return.
Outages in Canada and around the world now amount to more than 2 million barrels of lost daily output since the beginning of the year, virtually erasing a glut that emerged in 2014 and pulled down prices by as much as 70 percent before a recovery started earlier this year.
Goldman Sachs said it expected a decline in U.S. oil production by 650,000 bpd this year.
BMI Research said that production in Asia was also falling: “We anticipate combined crude oil production in the region’s largest producers, namely China, India, Malaysia and Indonesia, to fall by 4.9 percent in 2016 (equivalent to 331,500 bpd) as low oil prices and upstream spending cuts weigh on overall output.”
Adding Canada’s disruptions to declines in Latin America and Africa, overall output has likely fallen by over 2 million bpd this year.
Yet traders said they were re-focusing on brimming U.S. inventories, which are expected to hit records despite the disruptions from Canada, which exports most of its crude to the United States.
U.S. commercial crude stockpiles likely rose last week for the fifth straight week, a Reuters poll showed, with total U.S. crude inventories seen to have built by 500,000 barrels to a record high above 543 million barrels.
Some traders said a $40-$50 per barrel price range may reflect a balanced market with plentiful stocks.
However, with plenty of crude available, refiners have produced large volumes of gasoline and diesel, threatening to overwhelm demand despite the coming U.S. summer driving season.
If that happens, refiners will lower their output and cut orders for new crude feedstock, putting downward pressure on prices.