By Christian Berthelsen, Georgi Kantchev and Dan Strumpf 

Oil futures erased early losses Friday and drove higher as Canadian wildfires spread, further crimping oil production in the top supplier to the U.S., and an attack on a Nigerian production facility hampered output there.

The U.S. oil benchmark had been down as much as 1.8% in early trading but shook off losses beginning around 9 a.m. EDT and climbed higher, recently trading up 0.8% at $44.68 a barrel on the New York Mercantile Exchange. The global Brent contract also reversed an early decline, recently trading up 0.9% at $45.43 a barrel on the ICE Futures Europe exchange.

The turnaround coincided with reports that Canadian wildfires are spreading in Alberta's oil-sands production region, and increased estimates of the amount of oil production being taken offline as a result. Though there have been no reports of oil facilities damaged by the fires, they have forced the evacuation of thousands of residents in the area, including oil workers, leaving no personnel to run oil operations.

"The evacuation of staff in combination with the precautionary closure of pipelines is what is driving the drop in production," ClipperData said in a note.

Prior estimates of an outage of 645,000 barrels a day in production have been revised upward to as much as 1 million barrels a day, according to reports. Oil sands accounts for 2.5 million of Canada's 4 million barrels a day in production. Much of the output is sent to refineries in the U.S.

Meanwhile, a militant attack on a Chevron Corp. platform off the Nigerian coast shuttered that facility. Its production capacity wasn't immediately known.

Meanwhile, political infighting in Libya continues to threaten production and oil exports from the northern African country.

Despite initial gains earlier in the week, however, both benchmarks are on track to end the week lower, with Brent down around 7% for the week.

Oil prices have rallied sharply in recent months, up by more than half from their lows earlier in the year. But despite the short-term supply disruptions, global oil stocks still increased by 1.95 million barrels a day in the first quarter of the year and will continue to do so in the second, according to Stephen Brennock, analyst at PVM brokerage.

Later Friday, traders will also look to the latest U.S. oil rig count, which is as a rough proxy for activity in the industry. Last week, Baker Hughes Inc., which tracks the data, said the number of rigs drilling for oil fell by 11 to 332. There are now about 73% fewer rigs, from a peak of 1,609 in October 2014.

However, with prices now at levels that make drilling economical for some firms, the rig count might start rising soon and the decline in U.S. production may slow. This would, in turn, threaten the price recovery, analysts say.

In refined product markets, gasoline futures shook off early losses and rose 0.7% to $1.5018 a gallon, and diesel futures were up 1% at $1.3416 a gallon.

Write to Christian Berthelsen at christian.berthelsen@wsj.com, Georgi Kantchev at georgi.kantchev@wsj.com and Dan Strumpf at daniel.strumpf@wsj.com

(END) Dow Jones Newswires

May 06, 2016 11:09 ET (15:09 GMT)