Nigerian, Canadian supply issues help steady crude oil price

Oil prices settled largely unchanged 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.

In Nigeria, operations at Qua Iboe crude oil terminal were disrupted 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. This adds more woes to earlier outages in Forcados and Brass.

In Canada, 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.

Brent’s front-month contract, July, 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. WTI’s June contract settled down 3 cents at $48.16 a barrel, expiring as the front-month. It slid to $46.73 earlier.

July WTI, which will be the front-month contract settled 11 cents lower at $48.67. The discount, or contango, in June WTI versus July was the smallest since October, reflecting the strength in spot oil from supply outages.

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

Some traders are betting the dollar, which hit a near two-month high, will continue to rise over the next month or so, limiting the rebound in oil. Brent has rallied from January lows of $27 and WTI from February levels of $26. A stronger dollar makes greenback-denominated oil more expensive for holders of the euro and other currencies.

Others think the dollar will not dent oil much.