Three major oil firms have warned they will not be able to deliver on some contracts for Canadian crude, a further sign that output cuts due to wildfires are curbing supplies from the Alberta oil sands region. 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.
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 week-long blaze rages on. A force majeure event is an unforeseen event that prevents a party from fulfilling a contract. The companies acted after a fire this week 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.
BP produces oil in Canada via a partnership with Husky Energy Inc Husky said earlier this week it cut production at its Sunrise oil sands project to 10,000 bpd from 30,000 bpd after a pipeline that supplies the project with diluent was shut down. BP also buys oil from other producers to sell to refiners or other traders. A person familiar with BP's US refining operations said supplies to its US plants - Whiting, Cherry Point and Toledo - have not been affected. 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.