Oil steadies; Canadian, Nigerian supply issues offset strong dollar

Thu May 19, 2016 3:51pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices settled largely unchanged on Thursday as worries about Canadian and Nigerian supply outages offset the impact of a stronger dollar, which has rallied on growing expectations the Federal Reserve will raise interest rates next month.

The prospect of a U.S. rate increase in June prompted investors earlier on Thursday to cash out of long positions in Brent and U.S. crude's West Texas Intermediate (WTI) futures. Those positions made money after oil rallied on Monday and Tuesday on worries about supply outages.

But Brent and WTI closed sharply off the session lows due to crude export problems facing Canada's Suncor Energy (SU.TO: Quote) and reports of trouble at Nigeria's Qua Iboe crude oil terminal.

Suncor extended a force majeure that will prevent any more shipping of oil this month from its Syncrude facility. The decision came amid a raging wildfire in Canada's oil sands region that has shut output capacity by more than 1 million barrels per day.

In Nigeria, ExxonMobil (XOM.N: Quote) said operations at its Qua Iboe crude oil terminal were disrupted by "criminal" activity, although the plant was still producing. The terminal, Nigeria's largest and typically exporting more than 300,000 barrels per day, declared a force majeure last week after damage to a pipeline.

Earlier on Thursday, some traders said the Qua Iboe terminal had been closed and its workers evacuated, helping Brent and WTI shed losses faster.

"To be fair, there have been numerous supply disruptions over the past week," said John Kilduff, partner at New York energy hedge fund Again Capital. "You have to believe they are transitory, but they keep coming."

Brent's front-month contract, July LCON6, settled down 12 cents at $48.81 a barrel. It had fallen $1.55, or more than 3 percent, to $47.38 a barrel during the session.   Continued...

A section of the BP Eastern Trough Area Project (ETAP) oil platform is seen in the North Sea, around 100 miles east of Aberdeen in Scotland February 24, 2014. REUTERS/Andy Buchanan/pool