Oil Moves Below $40 As U.S. Producers Begin To Restart Output After HurricaneOil failed to stay above the $40 level and is moving towards the $39 level.
Oil Video 12.10.20.
The Number Of U.S. Rigs Drilling For Oil Continues To Increase
Oil managed to get below the $40 level as the strike in Norway ended while U.S. oil companies began to restart production in the U.S. Gulf of Mexico after Hurricane Delta.
On Sunday, 91% of U.S. Gulf of Mexico oil output remained shut, but the market expects that oil companies will be able to restore production quickly since they know how to deal with such issues.
The strike in Norway ended after oil companies and unions reached a wage agreement, removing the risk of a shutdown for Equinor‘s Johan Sverdrup oil field.
The above-mentioned factors limited supply in the near term and provided support to oil prices. Without these catalysts, oil quickly found itself under pressure as traders remained worried about the pace of oil demand recovery.
In addition, the recent Baker Hughes Rig Count report indicated that the number of U.S. rigs drilling for oil increased by 4 to 193. The number of oil rigs is trending up which is a not a positive development for the oil market.
Libya Restarts Sharara Oil Field Production
In my recent article on oil, I stated that Libyan oil production would be one of the key factors to watch in the upcoming weeks since Libya was actively trying to boost its production.
Over the weekend, Libya managed to lift blockade of the country’s biggest oil field, Sharara, which is capable of producing 300,000 barrels per day (bpd).
Sharara is not expected to reach this level anytime soon but Libya will work hard to restore production at its most important field. Currently, the country is producing about 300,000 bpd, and S&P Global Platts Analytics estimates that it could return to 500,000 bpd in October.
The pace of Libya’s oil production recovery will be important for the oil market which may face a slowdown in demand recovery as European countries start to introduce additional virus containment measures. If Libya surprises to the upside, oil may find itself under additional pressure.
For a look at all of today’s economic events, check out our economic calendar.