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Oil slips on stronger dollar; gains on the week on supply outages
[NEW YORK] Oil slipped on Friday on a stronger dollar and as investors cashed in on a three-day rally, but prices still ended the week higher after production in Nigeria fell to its lowest in two decades and wildfires slashed output from Canada's oil sands.
The dollar hit a more than two-week high against a basket of currencies, after strong US retail and consumer sentiment data, weighing on greenback-denominated commodities as imports become more expensive for countries using other currencies, and potentially hitting demand.
Opec production in April also hit the highest since at least 2008, pumping 32.44 million barrels per day (bpd) April, a hike of 188,000 bpd from March, it said in a monthly report.
The group signaled the global oil glut that has been weighing on markets for nearly two years may grow this year as surging output from its members makes up for losses from other countries whose production has been hit by low prices.
Oil was also pressured by investors locking in profits as it notched its fifth week of gains in the last six weeks and ahead of a long weekend in several countries in Europe, including Germany and France.
Brent crude futures settled down 25 cents at US$47.83 a barrel while US crude ended 49 cents lower at US$46.21.
On the week, Brent gained 5.2 per cent while US crude rose 3.4 per cent.
Prices recovered slightly as US oil production looked set to continue its decline after drillers cut rigs for an eighth straight week to the fewest since October 2009, oil services company Baker Hughes Inc said.
Unplanned oil supply outages have risen this month to the highest in at least five years because of the wildfires in Canada and further losses in Nigeria and Libya, giving a boost to oil.
The Canadian wildfires this week resulted in declarations of force majeure from at least four major oil firms. "The market sentiment remains biased to the upside, supported by a growing view that the global oil complex is already in a rebalancing pattern," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Support for prices came early in the session after Exxon Mobil Corp declared force majeure on exports of Nigeria's largest crude grade as a portion of production had been curtailed following damage to a pipeline by a drilling rig.
Output from Africa's largest oil producer has fallen to 1.65 million bpd due to militant attacks, Nigeria's finance minister said, from 2.2 million bpd.
Further adding to supply disruptions, an explosion rocked a Chevron oil pipeline in Nigeria's restive Delta region on Friday, a security source said, the second blast at a facility of the US oil major within a week.
Petromatrix oil analyst Olivier Jakob said Nigerian production was unlikely to be much above 1 million bpd, excluding condensates. "We expected more supply disruptions out of Nigeria this week but the pace of new supply problems from that country beats our expectations," he said.