After soaring on Monday, oil prices continued to rise on Tuesday after U.S. President Donald Trump returned to the White House from the hospital where he was treated for COVID-19, while supply disruptions in Norway and the U.S. Gulf Coast also supported price gains.
As of 9:48 a.m. EDT on Tuesday, WTI Crude prices were back above the $40 a barrel threshold, trading at $40.66, up 3.70 percent on the day. The international Brent Crude benchmark was also rising by more than 3 percent, at $42.66, up 3.37 percent.
“Having once again found support towards $39/b, Brent may have another go at the key band of resistance between $42.5/b and $43.25/b,” John Hardy, Head of FX Strategy at Saxo Bank, said on Tuesday.
Oil prices started this week with a price spike on Monday, after doctors said that President Trump’s health was improving following a weekend spent in the hospital after testing positive for COVID-19 on Thursday.
On Tuesday, prices continued their rally after President Trump returned to the White House from the Walter Reed Medical Center on Monday evening.
Hopes that Congress could reach a deal on a new stimulus package also invigorated the markets, including the oil market.
In terms of fundamentals, supply disruptions due to a strike of oil workers in Norway and potential shut-ins in the U.S. Gulf of Mexico due to another hurricane also supported oil prices on Tuesday. Related: Gulf Of Mexico Oil Drillers Prepare For Storm Delta
In Norway, the oil workers’ strike has shut in as much as 330,000 barrels of oil equivalent per day (boepd), some 60 percent of which is gas. The strike shut down four fields operated by Equinor in the North Sea, the Norwegian giant said on Monday, noting that production at the giant oilfield Johan Sverdrup “continues for the present.” A total of 43 members of the Lederne trade union have been on strike at Johan Sverdrup since the middle of last week.
In the U.S. Gulf of Mexico, Hurricane Delta “continues to rapidly strengthen and now has maximum winds of 110 mph,” the National Hurricane Center said on Tuesday.
Delta is expected to approach the northern Gulf Coast late this week as a hurricane, and there is a significant risk of dangerous storm surge, wind, and rainfall hazards along the coast from Louisiana to the western Florida Panhandle beginning Thursday night or Friday, the NHC said.
Chevron has already started evacuating all personnel from its platforms in the Gulf of Mexico ahead of Delta.
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By Tsvetana Paraskova for Oilprice.com
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There were two reasons for the recent decline of oil prices from $45 to $40 a barrel. One was OPEC+ extra crude oil exports of 1.24 million barrels a day (mbd) in September. The other reason is growing fears of a resurgence of the COVID-19 pandemic. However, the successful treatment of President Trump at Walter Reed Medical Centre gives hope that doctors are close to a successful anti-COVID vaccine.
In terms of fundamentals, there is currently a deficit of 700,000 barrels a day (b/d) in the supply-demand balance in the market. Global aviation which accounts for 8.1% of global oil consumption or 8.18 mbd is operating currently at 45% capacity. This means a loss of demand amounting to 4.49 mbd. And with a production of 300,000 barrels a day (b/d) and domestic consumption of 228,000 b/d, Libya can, in theory, export only 72,000 b/d. Moreover, OPEC+ exported additional 1.24 mbd in September. All in all there were 5.80 mbd additions but they are being offset by a loss of 6.5 mbd from US oil production (overwhelmingly shale oil) leaving a net deficit of 700,000 b/d. That is without deducting OPEC+ production cuts of 7.9 mbd.
By the way, the US Energy Information Administration (EIA) has grudgingly admitted to a loss of 3 mbd from claimed 13 mbd to 10 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London