Around the world, crude oil supplies are returning from temporary shutdowns, causing oil prices to shift lower once again after last week’s rally sent prices to a high of $41.19 on Thursday. Hurricane Delta has passed, allowing Gulf oil production to return to normal. The powerful storm shut down the most Gulf production since Hurricane Katrina, cutting off 91% (1.67 MMbpd) for several days. Many rigs remained offline on Sunday; as more Gulf rigs return to operations, expect a continued bearish effect on the market.
Despite disrupting one of America’s most dependable sources of oil, for a week, Hurricane Delta had a realtively small effect on oil prices. Citing various energy analysts, NBC commented on the storm: If Delta had struck a year ago…Drivers could have noticed a bump of as much as 25 cents per gallon of gas, but experts say Delta’s impact at the pump will be negligible — a few pennies, perhaps — because of… Covid-19.
America is not the only country recovering from temporary supply outages. In Norway, labor groups and oil companies reached a deal to end their strike, averting the 1 MMbpd shortage threatened by strikers. Moreover, Libya lifted the force majeure declaration on its largest oil field, El Sharara, and anlaysts expect the field to reach 300 kbpd within the next two weeks. While both the US and Norwegian outages were temporary, Libya’s rising production presents a real challenge for OPEC. To accommodate Libya’s rising supply, OPEC nations face the decision to increase cuts or accept lower oil prices. With prices just barely clinging to $40/bbl, the group may act to maintain the tighter supply limits.
The petroleum complex is moving lower as supplies return, with no new demand sources arising to soak up production. WTI crude is trading at $39.98, down 62 cents (-1.5%) from Friday’s closing price.
Fuel prices are also experiencing mixed losses. Diesel is trading at $1.1710, down 2.2 cents (-1.9%) as production comes back online and fundamentals weaken. Gasoline’s performance this morning has been a bit stronger relative to crude and diesel; the product is trading at $1.1884, a loss of just 1.5 cents (-1.2%).