Canadian Wildfires Disrupt Oil Supply, Push Prices Higher

Crude oil prices rose Tuesday as fast-moving wildfires in Canada’s energy-rich province of Alberta shuttered significant portions of heavy crude production, tightening North American supply and intensifying concerns about short-term disruptions.

July West Texas Intermediate (WTI) crude futures gained 1.90%, or $1.19, while July RBOB gasoline contracts climbed 1.27%, or 2.60 cents per gallon, reflecting traders' reactions to sudden supply constraints, according to data from CME Group.

The immediate trigger: a series of blazes in Alberta, Saskatchewan, and Manitoba that have prompted emergency evacuations and forced the curtailment of roughly 350,000 barrels per day of oil output—about 7% of Canada’s total production. Bloomberg reported that Cenovus Energy Inc., MEG Energy Corp., and Canadian Natural Resources Ltd. were among the companies affected, reducing operations due to proximity to the fast-growing Caribou Lake Wildfire near the Saskatchewan border

The fire, which has expanded to 61,500 hectares, is within 10 kilometers of nearly half a million barrels per day of oil production capacity, amplifying the risk of broader supply interruptions. A map published by Alberta Wildfire and the Alberta Energy Regulator shows offline capacity concentrated in northeastern Alberta, including 238,000 b/d impacted at one site alone.

Wildfire conditions remain severe. The Canadian Interagency Forest Fire Centre raised the national preparedness level to its highest rating—Level 5—on May 29, citing "very high to extreme wildfire activity." In response, the U.S. Department of Agriculture (USDA) announced the deployment of over 150 firefighters, an airtanker, and specialized equipment to assist in suppression efforts across the affected provinces.

“We are here to help our neighbors during their time of need, and our Forest Service Wildland Firefighters are the best in the business,” U.S. Secretary of Agriculture Brooke L. Rollins said in a press release. “We pray for their success as they fight fires and save lives”.

Although wildfires are not uncommon during summer months, this year’s early surge and intensity are proving particularly disruptive to energy markets, especially given the concentration of oil sands operations in Alberta. The broader implications for oil supply chains could intensify if the blazes move further into operational zones or delay the resumption of output.

Analysts say the fires have introduced a new geopolitical variable into oil price dynamics, traditionally dominated by OPEC+ policy shifts, Middle East tensions, and U.S. inventory data. As of Monday, 26 wildfires were burning out of control in Alberta alone, with the region accounting for the bulk of Canada’s oil production.

While markets wait for updates on containment efforts, oil traders are pricing in the potential for extended supply constraints. If production facilities remain offline for an extended period, the impact could ripple across North American refining margins and gasoline prices heading into peak summer driving season.

Canada’s position as the largest foreign supplier of crude to the U.S. amplifies the stakes for energy markets, and investors will be closely monitoring developments as emergency crews work to suppress the fires.