Exports of Nigeria’s Forcados grade of crude oil resumed on Sunday, a Shell spokesperson said on Monday, roughly a month after loadings of the medium sweet grade were suspended because of a potential leak at the export terminal just as Oil prices dipped on Monday as concerns about China’s faltering economic recovery and a stronger dollar took the momentum out of seven weeks of gains on tight supply. U.S. West Texas Intermediate crude again slid more than more than $1 a barrel to the day’s low before returning to $82.42 a barrel, down 76 cents. Brent crude futures were down 67 cents at $86.12 a barrel.
Sources had said that Forcados exports of the grade, which was scheduled to ship 220,000 barrels per day (bpd) in July, were halted on the evening of July 12 after workers saw fumes near a single buoy mooring where oil was being loaded onto a vessel. A single buoy mooring is essentially a floating loading facility that allows large tankers to moor offshore to discharge cargoes. Shell confirmed that injections into the terminal had been curtailed after the report, though no force majeure was declared. The Shell spokesperson said the cause of the suspension would be determined by a joint investigation between company and community representatives in tandem with government agencies.
Meanwhile Market participants are torn, weighing a tight supply-demand balance against signs of weakening demand from China, said Phil Flynn, analyst at Price Futures Group. “Part of it seems to be the Monday morning blahs. I think we still have to face a market that’s very tight,” Flynn said. Vandana Hari, founder of oil market analysis provider Vanda Insights, said a correction may be on the cards for crude markets. “Crude has been in overbought territory for some time now, defying expectations of a correction,” Hari said. She added that the focus had been on U.S. economic optimism, to the exclusion of economic headwinds in the euro zone and China. Weighing on oil prices, the U.S. dollar index extended gains after a slightly bigger increase in U.S. producer prices in July. That lifted Treasury yields despite expectations the Federal Reserve is at the end of hiking interest rates.
A stronger dollar pressures oil demand by making the commodity more expensive for buyers holding other currencies. Separately on Monday, a Shell spokesperson said exports of Nigeria’s Forcados crude oil resumed on Sunday, roughly a month after loadings of the medium sweet grade were suspended because of a potential leak at the export terminal. The suspension contributed to Nigeria becoming the second-biggest contributor to the drop in OPEC crude oil output in July, a Reuters survey showed. Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies, are expected to erode oil inventories over the rest of the year, potentially driving prices higher, the International Energy Agency said in a monthly report on Friday. Around the Black Sea, merchant ships remained backed up in lanes on Monday as ports struggled to clear backlogs amid growing unease among insurers and shipping companies a day after a Russian warship fired warning shots at a cargo vessel.
