Oil Price Fundamental Daily Forecast – Oversupply, Demand Worries Could Offset Storm-Related ShutdownsTypically, oil rises when production is shut down, but with the coronavirus pandemic getting worse, demand concerns are carrying more weight.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower shortly before the regular session opening on Monday after giving up earlier gains. Oil prices rose after the early futures market opening as a tropical storm in the Gulf of Mexico prompted drillers to evacuate rigs and shut in production, although gains were limited by concerns about excess global supplies and falling fuel demand.
Tropical Storm Sally Expected to Become Category 2 Hurricane
Tropical Storm Sally gained strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane. The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region.
US Oil & Gas Rig Count Falls for First Time in Four Weeks
U.S. energy firms cut the number of oil and natural gas rigs operating for the first time in four weeks as a rebound in crude prices from coronavirus lows over the past few months prompted some producers to return to the wellpad.
The U.S. oil and gas rig count, an early indicator of future output, fell by two to 254 in the week to September 11, according to data on Friday from energy services firm Baker Hughes Co.
That total rig count fell to a record low of 244 rigs during the week-ended August 14. That was 632 rigs, or 71% below this time last year.
In other news, in Libya, commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market, although it was unclear if oil fields and ports would begin operations.
Meanwhile, OPEC and its allies, meets on September 17 to discuss compliance with deep cuts in production, although analysts don’t expect further reductions to be made.
Typically, oil rises when production is shut down, but with the coronavirus pandemic getting worse, demand concerns are carrying more weight, while global supplies continue to rise. This may be the reason behind today’s early rangebound trade.
Currently exerting the most pressure on oil prices is Saudi Arabia’s $1.00 price cut on oil delivered to Asia, and a rise in U.S. Energy Information Administration (EIA) oil inventories.
For a look at all of today’s economic events, check out our economic calendar.