Hurricane Delta Has Moved On but Perfect Storm Now Hits Oil
By Barani Krishnan
Investing.com - The effects of Hurricane Delta may be wearing off, but the perfect storm for crude oil prices came Monday anyway, sending the market down nearly 3%.
The lifting of force majeure on Libya's largest oil field, the end of a strike by the Norwegian oil industry, and signs that US producers were contributing to production when Delta exited Mexico's Gulf coast came together to confuse the market.
Dimensional weight was increased by a forecast from seevol.com showing inventory levels in Cushing, the delivery location for US contracted crude, rose 3.9 million barrels in the week ended October 9.
"Overall, the crude oil market appears to have failed on the 50-day and 200-day moving averages and just returned below the 100-day average this morning," said Scott Shelton, energy futures broker at ICAP (LON: NXGN ) in Durham, North Carolina.
"I still think the market is rudderless and prone to MACRO-powered rallies, but the information on oil looks worse despite improved margins, and I think we could see another move to $ 38."
New York-traded West Texas Intermediate, the key indicator of US crude oil prices, was $ 39.43 a barrel, down $ 1.17, or 2.9% on the day. The move erased nearly a third of last week's 9.5% WTI gain.
London-traded Brent crude, the global benchmark for oil, fell $ 1.13, or 2.6%, to $ 41.71. Brent was up 9.1% last week.
Production in Libya, a member of the Organization of Petroleum Exporting Countries (OPEC), is expected to rise to 355,000 barrels per day (bpd) after force majeure was lifted on the Sharara oil field on Sunday.
Rising Libyan production will pose a challenge to OPEC + - a group made up of OPEC and allies including Russia - and its efforts to stem supply to support prices.
Hurricane Delta, which last week inflicted the biggest blow in 15 years on power generation in the US Gulf of Mexico, was downgraded to a post-tropical cyclone over the weekend.
Workers returned to production platforms on Sunday, and French oil major Total restarted its 225,500 barrels-per-day refinery in Port Arthur, Texas.
Prices have also been put under pressure by a jump in new COVID-19 cases, which has heightened the specter of further lockdowns that could dampen demand for oil.
Infections are at record levels in the American Midwest. In Europe, UK Prime Minister Boris Johnson announced new coronavirus lockdown measures, while Italy - which shocked the world with the horror of its Covid-19 saga in March - prepared new nationwide restrictions.
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