Canadian oil prices strengthen as fire envelopes more camps

* July WCS trades at $11.90/bbl below WTI

* Trading window largely shut for Canadian grades

By David Gaffen

NEW YORK, May 17 (Reuters) - Canadian crude oil prices

strengthened in light trading on Tuesday after a massive

wildfire burning in the oil sands region gathered strength,

forcing evacuations by producers and putting off expected

restarts of production.

The sudden movement of the wildfire caused Suncor Energy (Toronto: SU.TO - news)

Inc, one of the area's biggest producers, to shut its base

operations that had been expected to restart in coming days. The

company and fellow operator Syncrude Canada evacuated workers

from key installations north of the hub of Fort McMurray.

"This is quite an unexpected U-turn in events," said Jackie

Forrest, vice president in energy research at ARC Financial

Corp. "It (Other OTC: ITGL - news) 's realistic to think this outage is going to last

about another couple of weeks."

Around 1 million barrels per day of oil sands crude was shut

in early this month because of the out-of-control fire, which

burned parts of Fort McMurray and forced some projects to

evacuate workers.

Very little trading was actually seen in Canadian crude

grades, however. The bulk of trading in Canadian oil takes place

during the 2-1/2-week-long monthly trade cycle, which lasts from

the first of each month until the day before pipeline volume

nominations are due. Volumes are likely to be thin for the

remainder of the month.

Traders in Calgary said the relatively muted Canadian crude

price response to the outages so far was due to the lack of

actual damage to oil sands facilities and supply shortages being

met by crude drawn from storage.

"Some of the Canadian grades haven't been as affected as

much as one might think but that might be because there's so

much oil out there that the market is turning a bit of a blind

eye towards it," said Gene McGillian, senior analyst at

Tradition Energy in Stamford, Connecticut.

Even (Taiwan OTC: 6436.TWO - news) so, light synthetic crude from the oil sands for June

delivery jumped to $2.50 per barrel above the West Texas

Intermediate benchmark, according to Shorcan Energy brokers, up

from $1.45 per barrel over on Monday.

The Syncrude facility and Suncor's base plant operations,

which together produce nearly 700,000 bpd of synthetic crude,

were shut down on Monday evening as the fire moved closer.

There were no trades in Western Canada Select for June

delivery, but July WCS traded at $11.90 per barrel below WTI,

after settling at $12.30/bbl below WTI Monday.

U.S (Other OTC: UBGXF - news) . crude was lately trading at $48.43 per barrel, after

earlier hitting a seven-month high of $48.56.

(Additional reporting by Nia Williams in Calgary; Editing by

Cynthia Osterman)