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Oct 12, 2020

Oil Price Report: Oil falls nearly 3% as production comes back online

 

2-3 minutes - Source: CNBC


Oil pumping jacks, also known as "nodding donkeys", are reflected in a puddle as they operate in an oilfield near Almetyevsk, Russia, on Sunday, Aug. 16, 2020.

Oil pumping jacks, also known as “nodding donkeys”, are reflected in a puddle as they operate in an oilfield near Almetyevsk, Russia, on Sunday, Aug. 16, 2020.

Andrey Rudakov | Bloomberg via Getty Images

Oil prices fell about 3% on Monday as force majeure at Libya’s largest oilfield was lifted, a Norwegian strike affecting production ended and U.S. producers began restoring output after Hurricane Delta.

Brent crude fell $1.21, or 2.8%, to $41.64 a barrel West Texas Intermediate fell 2.88%, or $1.17, to settle at $39.43 per barrel.

“Renewed post hurricane production in the Gulf of Mexico, an apparent restart over the weekend of Libya’s largest oil field and today’s strength in the U.S. dollar increase the possibility of a WTI downswing back to the early October lows,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Hurricane Delta, which inflicted the biggest blow in 15 years to energy production in the U.S. Gulf of Mexico last week, was downgraded to a post-tropical cyclone at the weekend.

Workers headed back to production platforms on Sunday and French oil major Total restarted its 225,500 barrel per day Port Arthur refinery in Texas.

Front-month prices for both contracts gained more than 9% last week in the biggest weekly rise for Brent since June. But both fell on Friday after Norwegian oil companies struck a deal with labour union officials to end a strike that had threatened to cut the country’s oil and gas output by close to 25%.

Production in Libya, a member of the Organization of the Petroleum Exporting Countries (OPEC), is expected to rise to 355,000 barrels per day (bpd) after force majeure at the Sharara oilfield was lifted on Sunday.

Rising Libyan output will pose a challenge to OPEC+ - a group comprising OPEC and allies including Russia - and its efforts to curb supply to support prices.

Prices were also pressured by a jump in new COVID-19 cases, which has raised the spectre of more lockdowns which could dampen demand for oil.

Infections are at record levels in the U.S. Midwest. In Europe, British Prime Minister Boris Johnson announced new coronavirus lockdown measures and Italy is preparing fresh nationwide restrictions.

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