Oil Drops Again As Production From Multiple Sources Resumes

Meanwhile, Covid continues to colour analytical outlooks: File Image/PixaBay

The termination of a host of production disruptions around the world caused crude prices on Monday to drop about 3 percent, while analysts continued to worry about the resiliency of demand recovery amid an increase in new Covid-19 cases.

U.S. workers returned to production platforms after Hurricane Delta was downgraded to a post-tropical cyclone, and Total commenced restarting its 225,500 barrel per day (bpd) Port Arthur, Texas, refinery; in Norway, resumption of output began following a deal to end a strike that would have cut production by 25 percent; and in Libya, output was expected to rise to 355,000 bpd after force majeure was lifted.

Consequently, Brent on Monday declined by $1.13 to $41.72 per barrel, and West Texas Intermediate dropped $1.17 to $39.43 per barrel.

Giovanni Staunovo, analyst at UBS, noted that these activities "are not helpful in a period with ongoing demand concerns.”

As for the overarching fear that Covid rates would trigger more lockdowns (already in the works for Britain and Italy), Harry Tchilinguirian, analyst at BNP Paribas, said “If oil demand recovery continues to struggle due to new or stricter Covid related mitigation measures, the Organization of the Petroleum Exporting Countries [OPEC] may need to reconsider the planned tapering of their voluntary supply cuts.”

Unfazed, Goldman Sachs on Monday said it remained optimistic about oil and gas prices, and with regards to the upcoming U.S. elections its commodities team wrote in a note that “We do not expect [them] to derail our bullish forecasts.....with a Blue Wave likely to be in fact a positive catalyst” because a Joe Biden administration could make production - especially for shale - more expensive and more regulated.

Goldman sees improved demand in 2021 and tighter supply for both gas and shale oil.

Of course, what the market is waiting for far more than who wins the White House is a vaccine for Covid, and on Monday it was reported that over 180 countries will participate in the World Health Organization’s initiative to finance vaccines that will be distributed fairly to both rich and poor countries.

Also, according to CNN source, a plan is underway for a pilot program that would use a combination of testing and quarantines to help get international air traffic moving again, possibly before the end of the year.