Oil Gains Ground As Tropical Storm Delta Forces Evacuation Of Offshore PlatformsOil producers are once again forced to evacuate their workers from the platforms in the U.S. Gulf of Mexico.
Oil Video 06.10.20.
Tropical Storm Delta Pushes Oil Prices Above The $40 Level
This week is full of positive near-term catalysts for oil. The U.S. President Donald Trump was discharged from hospital and got back to the White House. A strike of offshore workers in Norway reduced the country’s production capacity by 330,000 barrels of oil equivalent per day (boepd). Now, another bullish catalyst emerged.
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Tropical Strom Delta, which is expected to strengthen into a Category 3 hurricane, forced the evacuation of oil platforms in the U.S. Gulf of Mexico.
Another round of evacuations will put pressure on the rebound of U.S. domestic oil production, which still struggles to get above 11 million barrels per day (bpd) due to the negative impact of hurricanes.
This is a bullish development for oil as it may keep inventories under pressure at a time when demand recovery is slowing down.
A combination of positive catalysts at the beginning of this week pushed oil from the $37 level to the $40 level, and oil is currently trying to settle above the nearest resistance level at $40.70.
It remains to be seen whether these gains will be sustainable but oil bulls should be happy with the current market situation since oil was in a freefall just a few days ago.
Will COVID-19 Get Back Into Market’s Focus?
Several trading sessions ago, oil traders were worried that additional virus containment measures will put pressure on demand for oil. These fears have completely evaporated at the beginning of this week as traders focused on the strike in Norway and Tropical Storm Delta.
However, the strike and the storm will likely be short-term catalysts for oil, while the negative impact from the continued problems on the coronavirus front may last longer.
Various countries continue to introduce new measures but their impact is still not visible in oil demand data. However, countries may move for stricter enforcement of new measures over time. For example, reports suggested that the lockdown in Spain’s capital Madrid was not enforced properly, but Spanish authorities started to work on this issue.
In Russia, Moscow restricted the use of transport for students and older citizens, which may be just the first significant measure on the way to the full lockdown.
In my opinion, the negative developments on the coronavirus front will ultimately put some pressure on oil demand, and oil will need additional catalysts to continue its current rebound.
For a look at all of today’s economic events, check out our economic calendar.