NEW YORK Oil prices rose on Monday as Nigeria's oil industry reeled from crippling attacks and traders cited data pointing to fresh draws in U.S. stockpiles, but crude futures pared gains after remarks from Federal Reserve Chair Janet Yellen fed expectations that U.S. interest rates could rise this year.
Global oil benchmark Brent initially hit seven-month highs on worries about plummeting Nigerian production.
Output of Nigeria's Bonny Light crude has fallen by an estimated 170,000 barrels per day (bpd) following recent attacks on pipeline infrastructure, industry sources said. Total crude production has fallen more than 500,000 bpd in a country that was once Africa's biggest oil producer.
Oil retraced gains as the dollar popped up briefly after U.S. Fed Chair Janet Yellen said she still expects gradual interest increases this year despite disappointing U.S. jobs growth in May.
The dollar's gains did not last, but oil traders remained wary because any near-term gains by the greenback would make it costlier for those holding other currencies to buy dollar-denominated crude. The dollar rose briefly after Yellen spoke, but could rally in coming days if speculation on a rate hike grows, traders said.
Brent crude futures were up 68 cents, or 1.3 percent, at $50.32 a barrel by 1:22 p.m. EDT (1722 GMT). Earlier in the session, it hit $50.83, its highest since November.
U.S. crude futures rose 80 cents, or 1.6 percent, to $49.42, after an intraday high at $49.90.
Other developments limiting oil's advance included Total's reopening of three of its five French refineries after strikes, quicker-than-expected supply builds by Iran and the second weekly rise in the U.S. oil rig count since the start of 2016.
Market intelligence firm Genscape reported a drop of just over 1 million barrels in inventory at the Cushing, Oklahoma delivery point for U.S. crude futures during the week to June 3, traders who saw the data said.
Supply outages from Nigeria, Canada, Libya and Venezuela, have forced U.S. refiners to draw more from domestic crude stockpiles lately.
"At this point, there is no sign that the Nigeria (situation) is getting any better, and it's looking worse," said Scott Shelton, energy broker with ICAP in Durham, North Carolina.
Any spare U.S. refining capacity arising from optimum refinery runs during the summer might not be enough to balance the market without deeper stock drawdowns that would support crude prices more, he said.
(Additional reporting by Julia Payne in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely, William Hardy and David Gregorio)
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Updated Date: Jun 07, 2016 00:15:05 IST