Singapore — 0250 GMT: Crude oil futures fell during mid-morning trade in Asia Oct. 12, extending losses seen on Oct. 9, as supply-side disruptions in the US Gulf of Mexico and Norway abated, and Libya's state-owned National Oil Corp. lifted the force majeure on the Sharara oil field, threatening to add more barrels to a market reeling from the lack of demand.
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Register NowAt 10.50 am Singapore time (0250 GMT), ICE Brent December crude futures were down 36 cents/b (0.84%) from the Oct. 9 settle to $42.49/b, while the NYMEX November light sweet crude contract was down 33 cents/b (0.81%) at $40.27/b. Both international crude markets had fallen 1.13% and 1.43% on the day respectively to settle at $42.85/b and $40.60/b respectively on Oct. 9.
The downward trajectory of the crude futures comes after a labor strike in Norway ended on Oct. 9, and Hurricane Delta in the US Gulf of Mexico dissipated. These events had brought a considerable volume of crude production offline, and had driven a 9.12% and 8.74% on the week surge in the December Brent and the November WTI, respectively, in the week ended Oct. 9.
In Norway, the labor strike had taken out 330,000 b/d of oil equivalent output and was threatening to shutter up to 1 million boe/d of output in the coming days, but it came to a end on Oct. 9 after state-led mediation efforts saw Norwegian Oil and Gas companies striking a wage agreement with the Lerderne Union.
Meanwhile, in the US Gulf of Mexico, with the worst of Hurricane Delta having passed, oil and gas producers have begun redeploying crews to offshore platforms to inspect the infrastructure for damage, make the necessary repairs and to subsequently resume production, S&P Global Platts reported on Oct. 10.
According to data from the US Bureau of Safety and Environmental Enforcement, 91.7% or 1.697 million b/d of the oil production and 62% or 1.692 Bcf/d of gas production remained offline in the Gulf as of Oct. 10.
"The US Gulf had been producing close to 1.8 million b/d of crude pre-Delta," S&P Global Platts Analytics' analyst Sami Yahya said. "Given widespread curtailments, volume recovery may take up to two weeks post peak impact, which has likely been reached."
Additionally, the supply-side equation deteriorated further after Libya's state-owned National Oil Corp. said on Oct. 11 that it had also lifted the force majeure on Sharara, the country's top producing oil field, which is capable of pumping out as much as 300,000 b/d of oil.
Libya had already ramped up its oil production to 300,000 b/d after the Libyan National Army lifted its oil embargo, and more oil from the OPEC+ member could complicate the alliance's efforts to reduce supply in the market, as despite improved quota compliance in the month of September, the OPEC+ alliance currently has 2.375 million b/d of compensation cuts due for the rest of the year.
Stephen Innes, chief market strategist at AXI, said in an Oct. 12 note: "According to local drillers, Libya's Sharara field will initially pump 40,000 barrels of crude a day before reaching its capacity of almost 300,000 barrels in 10 days. The permanency of these barrels returning to the market will worry oil bulls and provide a nagging pain in the neck to OPEC."
However, the impact of the bearish supply-side developments may have been cushioned by speculation that Saudi Arabia is reconsidering the roll-back in OPEC+ production quotas at the beginning of 2021, when the OPEC+ alliance is slated to relax the current 7.7 million b/d curtailment to just 5.8 million b/d.
"It is understood [that] Saudi Arabia is concerned about the rising infections of COVID-19 around the world and its impact on demand," ANZ analysts said in an Oct. 12 note.
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