Crude-oil futures traded lower Monday, pressured after Libya lifted force majeure at its largest oil field, producers began restoring output in the Gulf of Mexico following Hurricane Delta and the end of a strike by Norwegian oil workers.
West Texas Intermediate crude for November delivery fell $1.28, or 3.2%, to $39.32 a barrel on the New York Mercantile Exchange. December Brent crude was down $1.19, or 2.8%, at $41.66 a barrel on ICE Futures Europe.
WTI, the U.S. benchmark, rose nearly 10% last week, while Brent, the global benchmark, rose 9.1%.
With the passing of the hurricane and the resolution of the strike in Norway, “investors are more concerned about the higher output in the face of subdued demand,” said Mihir Kapadia, chief executive of Sun Global Investments. “However, more disruptions in the Gulf are likely in the coming weeks as the hurricane season continues. This could see prices increase again as workers will be expected to halt production during this time. ”
Hurricane Delta hit Louisiana as a Category 2 storm with sustained winds of over 100 miles an hour on Friday. The Bureau of Safety and Environmental Enforcement estimated Sunday that 91.01% of current oil output in the Gulf of Mexico had been shut in due to the storm, along with 62.15% of natural-gas production.
Offshore output will be returning in the aftermath of the hurricane, said Robbie Fraser, senior commodity analyst at Schneider Electric, in a note.
The year 2020 “has been a record hurricane season with repeated disruptions in the Gulf of Mexico, and is expected to trigger some volatile inventory data over the next 1-2 weeks,” he said. He also pointed out that weekly inventory data from the Energy Information Administration will be delayed to Thursday because of Monday’s federal holiday.
Norwegian oil producers and workers reached a wage deal on Friday, ending a strike that had curtailed output in the North Sea by more than 300,000 barrels a day and had threatened to further weigh on production this week.
Meanwhile, Libya’s state-owned National Oil Co. on Sunday said it had lifted force majeure at Sharara, its largest oil field, after a military commander lifted a monthslong blockade. NOC didn’t disclose the current level of output at Sharara, which has a capacity of around 300,000 barrels a day, according to S&P Global Platts.
Bloomberg, citing a person with knowledge of the situation, reported that the field will initially pump 40,000 barrels of crude a day, reaching its capacity of almost 300,000 barrels a day next week. That would roughly double Libya’s output and complicate efforts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to manage supply in the face of demand curtailed by the COVID-19 pandemic.
Petroleum products traded on Nymex followed oil prices lower, with November gasoline down 1.8% at $1.1818 a gallon and November heating oil losing 2.8% to $1.1599 a gallon.
Natural-gas futures, however, climbed sharply. U.S. liquefied natural gas export facilities “saw minimal effects from Hurricane Delta over the weekend, while offshore production remains almost entirely shut in,” said Christin Redmond, commodity analyst at Schneider Electric.
November natural gas rose 5% to $2.879 per million British thermal units.