Oil fell on Monday, surrendering gains made after Canada's most destructive wildfire in recent memory knocked out over a million barrels in daily production capacity, as caution among investors prevented a return to late April's 2016 price highs.
The lost capacity is equivalent to well over a third of the country's typical daily production, and almost all of Canada's crude from oil sands is exported to the United States.
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.
"We believe that support to prices should remain short-lived. The market remains awash with oil as rising Middle Eastern output is more than offsetting declining U.S. shale production and the various temporary disruptions," said Norbert Ruecker, head of commodities research at Julius Baer.
The impact of the production loss has been far more marked in the U.S. crude market, where prices for West Texas Intermediate oil for delivery in July are now above those for Brent.
Investors now hold near-record high bets on a rising oil price, which analysts say might mean there is less scope for Brent to rally after having gained 25% in a month.
"Positioning has been already very stretched in the oil market ... Some must have taken the opportunity to exit, so that's one angle that momentum is slowing down," Barclays Capital commodities strategist Miswin Mahesh said.
"There is a slight fear that prices have recovered too quickly, and we risk repeating the same price trajectory seen around Q2 2015, where the rally slowed down the market balancing process," he added.
Canadian officials on Sunday showed some optimism as favorable weather helped fire fighters, driving the flames away from the oil sands town Fort McMurray, but there was no timeline for a restart of operations at evacuated sites.
Markets were also watching Saudi Arabia, the world's biggest oil exporter, where a government shake-up over the weekend included the appointment of Khalid al-Falih as head of the new Ministry of Energy, Industry and Mineral Resources.
"Changes in Saudi Arabia oil leadership only underscore the shift in strategy to one focused on market share over price," Morgan Stanley said.