Oil prices rose today, as a hurricane in the US and an oil worker strike in Norway reduce global supplies.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on these events:
"Since the oil demand recovery is on mute at the moment, bullish news are usually linked with the supply side.
Although now mostly priced in, Hurricane Delta continues on its path towards Louisiana with 80% of US GoM output now shut-down. The shut production provides a breath for traders, who have been seeing oil stocks rising again.
The market is welcoming supply cuts as the world is currently producing more oil than it can consume.
In the other side of the Atlantic, the Norwegian energy workers’ strike that is still ongoing could also threaten more supplies. But normally, in Norway, an intervention would occur when significant production volumes are threatened.
On the bearish side, speculation is mulling about OPEC+ not being able to agree on tapering production cuts come January 2021, if the demand recovery continues to disappoint. The OPEC+ alliance is already like a relationship with a lot of frustration and tension, caused by some members not contributing what they have to for the common cause.
In the Middle East, Iran’s bold moves to export more crude by circumventing sanctions through inventive ways is seemingly not going unnoticed by the US, which is now allegedly working on new sanctions on the Iran financial sector.
A potential change in the output agreement is not fully priced in, and development will be carefully watched by the market in the months ahead leading up to the December OPEC+ meeting. A change, deepening the agreed cuts, could support the oil price recovery massively should it happen.
On the demand side, real-time data is showing an effect on lower road traffic in Asia due to the Golden week, sending the global traffic to 93% of last year’s road traffic levels in the last couple of days, but the market sees through this as demand is expected to bounce back post-holidays.
Since most of the price boost is weather and strike-related today, it may not be here to stay, with prices possibly returning to lower levels post the hurricane and Norway’s strike. Traders know it but profiting from the uncertainty during such times is nothing new in the oil world."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/08102020/oil-declines-as-supply-gets-hit-by-us-hurricane-and-norway-strike/