Oil up, but oversupply fears remain
LONDON, October 13, 2020 – Oil was up on Tuesday morning in Asia, staging a slight recovery from the previous day’s 2.9% fall. However, oversupply issues continue to dog the market with ever-rising Covid-19 number continuing to slash global demand.
Brent oil futures were up 0.19% to $41.80 by 11:38 PM ET (3:38 AM GMT) and WTI futures rose 0.23% to $39.52.
Recent supply outages that have assisted oil prices are coming to an end, leading to the strong fall in the previous trading session. US Gulf of Mexico rigs are coming back onstream after Hurricane Delta passed through the region late in the previous week.
In Norway, an agreement has been reached between striking oil workers and management, ending a strike that had disrupted 8% of Norway’s output. The country’s 460,000 barrels per day (bpd) Johan Sverdup field was due to have been shut down by strike action next week, the anticipation of which had helped sustain prices.
A further oversupply factor is coming from Libya, where the Sharara field had its force majeure embargo lifted on Oct. 11. The field is expected to reach 300,000 bpd if it returns to pre-embargo levels, nearly doubling the North African Organization of Petroleum Exporting Countries (OPEC) member’s current output.
Commonwealth Bank commodities analyst Vivek Dhar said in a note: “That would effectively add 0.3% of global oil supply in a very short time frame.”
OPEC+, a group formed of OPEC and its allies, is due hold a meeting of its market monitoring panel on Oct. 19. The group is expected to continue with the 7.7 bpd cuts it put in place earlier in the year, though many investors are anticipating these to be both extended and deepened.
Andrew Lebow, senior partner at Commodity Research Group said: “They look at the balances as carefully as anybody else, and they’re looking at what the demand picture is. It’s highly unlikely that they’re going to pursue a tapering strategy. If anything, they might talk about having to reduce production, rather than increase production.”
Investors are looking to crude oil supply data from the American Petroleum Institute, due later on the next day.
First published on Investing.com