* Oil up as much as 5 pct before paring gains
* Wildfire razes Canadian oil town; some pipelines to U.S.
shut Fighting in Libya escalates, adding to oil risk
* Dollar up most in 3 weeks; Cushing stocks build by 1.35
mln bbls
* Coming up: U.S. April jobs report, due on Friday
(Adds total U.S. crude stockpile number in paragraph 7)
By Barani Krishnan
NEW YORK, May 5 (Reuters) - Oil prices surged on Thursday
after a raging wildfire near Canada's oil sands region curbed
output that mainly flows to the United States, before settling
off their highs as a rebounding dollar and a huge U.S. stockpile
build cut into gains.
While the oil sands facilities are mostly to the north of
the wildfire in city of Fort McMurray in Alberta that is
spreading south, as much as a third of Canada's daily crude
capacity has been cut and some major pipelines closed after more
evacuations were ordered.
A stranded Glencore (LON:GLEN) oil cargo in Libya, after a stand-off
between eastern and western political factions, also fed the
rally at first.
Some traders said the market had overreacted to both events.
"The Canadian blaze, horrific as it is, is far south of the
real producing fields to cause real lasting damage to production
there," said John Kilduff, partner at New York energy hedge fund
Again Capital. "The Libyan barrels weren't really on the market
anyway."
Crude oil futures jumped 5 percent before paring gains.
Their retreat came as the dollar .DXY rose 0.6 percent, its
most in three weeks, making greenback-denominated oil costlier
for holders of the euro and other currencies.
Some traders also pinned oil's weakening to market
intelligence firm Genscape's report of a 1.35 million-barrels
stockpile build at the Cushing, Oklahoma delivery hub for U.S.
crude futures during the week to May 3. The Genscape report came
on the heels of U.S. government data showing total crude
stockpiles at record highs above 543 million barrels last week.
Brent futures LCOc1 settled up 39 cents, or 0.9 percent,
at $45.01 a barrel.
U.S. crude's West Texas Intermediate (WTI) futures CLc1
rose 54 cents, or 1.2 percent, to settle at $44.32.
Earlier this week, oil lost its almost unbroken upward
momentum since April's gain of more 20 percent that gave Brent
its best monthly gain in seven years. Over Monday and Tuesday,
crude prices fell 6 percent as major producers in and outside
OPEC pumped at or near record highs. OPEC/O
Even so, some analysts said the fallout from the Canadian
inferno was being underestimated.
At least 640,000 barrels per day (bpd) of capacity was
offline, according to Reuters' calculations.
"The situation is clearly very serious," said London-based
PVM, which notes that of the 4.5 million bpd that Canada
produces, 3.4 million goes to the United States.
On Friday, traders will be on the lookout for U.S. jobs data
for April, to indicate the likelihood of a rate hike by June
that will further bolster the dollar.
FRX/
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GRAPHIC-Map of the Fort McMurray fire http://tmsnrt.rs/1TtvIOD
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