U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower and appear to be headed toward a second consecutive 1% loss on Monday as U.S. producers began restoring output post-Hurricane Delta, and after a labor strike affecting Norwegian production came to an end.
Oil Prices Slip after Norway Oil Worker Strike Ends
Oil prices are slipping in anticipation of a boost in crude oil output after oil workers ended their strike in Norway. Norwegian oil firms struck a wage bargain with labor union officials on Friday, ending a 10-day strike that had threatened to cut the country’s oil and gas output by close to 25% this week.
Hurricane Delta Shuts Most US Offshore Oil Output in 15 Years
Hurricane Delta, which dealt the greatest blow to U.S. Gulf of Mexico energy production in 15 years, was downgraded to a post-tropical cyclone at the weekend. Workers headed back to production platforms on Sunday, and Total SA was working to restart its 225,500 barrel-per-day Port Arthur, Texas refinery.
Colonial Pipeline, the largest oil products pipeline in the United States, had to shut its main distillate fuel line, however, after the hurricane disrupted power, the company said on Sunday.
In Other Bearish News
U.S. energy firms added oil rigs for a fourth week in a row last week, data from Baker Hughes showed on Friday. Elsewhere, production in Libya – a member of OPEC – is expected to rise to 355,000 barrels per day on Monday after force majeure was lifted on the Sharara field from Sunday.
Traders are also focusing on the U.S. election in November, which could alter energy policies in the world’s biggest oil consumer and one of its biggest producers. Several analysts expect U.S. presidential hopeful Joe Biden to pursue a deal with Iran that could lead to more oil supplies. However, Goldman Sachs thinks the news would not drive prices sharply lower since the increases would likely be gradual.
Low coronavirus-related demand moves back to the forefront with the lifting of shutdowns in the Gulf of Mexico and the end of the strike in Norway. This is helping to put in a short-term top and could lead to a meaningful retracement of the recent short-covering rally.
However, the markets could find support over the near-term if U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin move closer to even a partial deal over additional fiscal stimulus. Of particular interest for the oil market will be a deal to give U.S. airlines a bailout package.