Oil Closes Near $48 Amid Easing Dollar Gains, Nigeria Violence

  • Crude declined earlier as dollar rose on Fed meeting minutes
  • Exxon Nigeria says Qua Iboe output continues, bridge shut

Oil Glut Absorbs Canada, Nigeria Disruption Shocks

Oil closed near $48 a barrel in New York after the dollar rally eased and a flurry of headlines about Nigeria’s oil industry bolstered concern about supply.

Crude fell as much as 3 percent earlier as the dollar rose against its peers after the Federal Reserve on Wednesday published minutes of its latest monetary policy meeting that suggest a June rate hike is possible. A stronger greenback reduces the investment appeal of commodities priced in the currency. Exxon Nigeria said Thursday that production of Qua Iboe grade continued after earlier saying that bridge access to the terminal was blocked.

"The dollar lost a little steam after gaining earlier and the oil market responded," said Gary Cunningham, head of market research at Tradition Energy in Stamford, Connecticut. "We should waffle around this area in the near term."

Crude has surged more than 80 percent since slumping to the lowest in 12 years in February on signs the global glut will ease as U.S. output declines. OPEC’s strategy to defend market share is working, Kuwait’s acting oil minister said in an interview Wednesday, and unexpected outages have created a production deficit earlier than expected, according to Goldman Sachs Group Inc.

Federal Reserve

West Texas Intermediate for June delivery, which expires Friday, fell 3 cents to settle at $48.16 a barrel on the New York Mercantile Exchange. Prices touched $48.95 Wednesday, the most since Oct. 12. Total volume traded was 13 percent below the 100-day average at 3:03 p.m. The more-active July contract slipped 11 cents to $48.67.

Brent for July settlement decreased 12 cents to $48.81 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a 14-cent premium to July WTI.

The Bloomberg Dollar Spot Index was little changed after rising as much as 0.3 percent to the highest level since March 29 on growing speculation that the Fed will raise interest rates as soon as next month.

"We’re beholden and hostage to the Fed," said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets. "In our view it’s likely that the Fed will raise rates in June. On Tuesday it seemed the market had discounted that prospect, which changed with the Fed minutes on Wednesday."

Niger Delta

After years of relative peace, militants are again blowing up pipelines that criss-cross the mangrove swamps of Nigeria’s Niger River delta, reducing oil output to the lowest in almost three decades.

Meanwhile, in Canada, Alberta fire fighters successfully defended Suncor Energy Inc. and Syncrude Canada Ltd.’s oil-sands sites from wildfires and rain brought some relief as a blaze that shut in more than a million barrels a day of production continued to grow. The fire, which is now 5,050 square kilometers (1,950 square miles) in size, burned up to and around the companies’ oil-sands mines and is now spreading into remote forests to the east into neighboring Saskatchewan, said Chad Morrison, an Alberta fire official.

The market will rebalance in the third or fourth quarter of the year as demand increases, pushing prices to $50 a barrel by the end of the year, Anas Al-Saleh, Kuwait’s acting oil minister, said in an interview Wednesday in Kuwait City. OPEC’s market share “theory has been working well,” said Al-Saleh, who is also finance minister and deputy prime minister.

"The oil market should rebalance later this year," Haworth said. "There will be an upside limit to how far prices can go until then."

U.S. crude supplies rose by 1.3 million barrels to 541.3 million last week, near the highest since October 1929, Energy Information Administration data show. Gasoline demand was at 9.56 million barrels a day in the four weeks ended May 13, the highest seasonal level in at least a decade, according to the EIA.

Oil-market news:

  • France is bracing for a possible interruption of operations at its refineries. Union members from the Confederation Generale du Travail will vote at around noon Friday on whether to stop work.
  • Iraqi crude output has probably peaked and is likely to fall short of the country’s target over the next two years, according to an official with Lukoil PJSC, operator of one of the country’s biggest fields.
  • In Libya, oil exports are set to resume Thursday from the port of Hariga. 
  • Venezuela’s oil supply risks may be “overstated,” Morgan Stanley said.
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