Hits to Americas oil output show global glut not invincible

By Terry Wade

HOUSTON (Reuters) - Wildfires in Canada. Pipeline sabotage in Colombia. Instability in Venezuela. U.S. frackers at a standstill. Drops in oil output are happening so fast that it looks as if the Americas alone could resolve global oversupply.

The 60 percent price slide of the last 23 months has been consistently pegged to one problem: current global supply exceeds demand by 1.5 million barrels per day (bpd).

But oversupply could evaporate quite quickly when seen through the prism of current disruptions and declines in the Western Hemisphere.

"Unplanned oil supply disruptions have been a key element so far this year that have contributed to a tighter oil market than was otherwise expected," analyst Guy Baber of Simmons & Co. told clients on Thursday.

He also cautioned that if the disruptions were to linger OPEC, which so far has not acted to curb output, would have limited excess capacity to feed a tight market.

Consider this: The wildfire in Fort McMurray, at the heart of Canada's oil sands region, has forced more than 640,000 bpd out of production, according to Reuters estimates, and one operator, Canadian Natural Resources Ltd, said if it loses power then its crude output would tumble about 80 percent.

U.S. output, already having plunged 800,000 bpd on a precipitous drop in new drilling, is expected to slide another 800,000 bpd in the next five months, according to the Energy Information Administration.

Latin America's crude oil production, suffering from under investment, declined 4.6 percent in the first quarter of the year to 9.13 million bpd, a loss of 441,000 bpd from the same period a year ago, according to data from individual countries and OPEC.

The largest decline was in Venezuela, which lost 188,000 bpd in the first quarter as President Nicolas Maduro's government wrestles a deep economic crisis.

Taken together, signs of tighter supply in the Americas helped lift prices for U.S. benchmark WTI crude to an intraday high on Thursday of more than $46 a barrel, within striking distance of a new three-month high.

Analysts at Baird told clients to "look for WTI gains to accelerate if the contract pushes through last Friday's intraday high of $46.78 per barrel."

Nonetheless, with Iran and Iraq ramping up exports, the market still forecasts oversupply. In Europe, Brent crude futures for delivery five years out were still only at a small $10 per barrel premium to one-month contracts on Thursday, a sign the "lower for longer" price scenario may linger.

(Additional reporting by Amanda Cooper in London, Marianna Parraga in Houston and Liz Hampton in Edmonton; Editing by Andrew Hay)