The Commodities Feed: Oil Supply Risks Subside

Your daily roundup of commodity news and ING views.

Energy

Oil has been under pressure once again this morning, with supply concerns subsiding. In Libya, force majeure at the largest oil field in the country, Sharara was lifted over the weekend, and production is expected to resume shortly. Reports suggest that output will initially be 40Mbbls/d, and that it would take 10 days for output from the field to reach its capacity of 300Mbbls/d. If this turns out to be the case it would take Libyan output back to the region of 600Mbbls/d, and not helping OPEC+ in the task of rebalancing the market.

Meanwhile the labour strikes we saw in Norway last week which led to around 8% of the country’s oil and gas output being shut have come to an end. There were concerns that an escalation in the strike action would lead to further fields having to shut this week, including Johan Sverdrup. However with the union having come to a wage agreement, affected production should make a quick return.

The market has largely ignored the impact from Hurricane Delta, which has led to a significant amount of offshore production in the US Gulf of Mexico (GOM) having to shut. According to the Bureau of Safety and Environmental Enforcement, as of Saturday 1.68MMbbls/d of oil production was shut-in, which is a little over 91% of total US GOM oil output. However this production should start to return, with the hurricane now having passed. Although there are disruptions further downstream, with power outages having affected operations at some refineries, whilst the Colonial pipeline 2, which links refiners in the Gulf Coast to the east coast has also had to shut due to power disruptions. The line predominantly carries distillate fuel.

Finally, what is not helping sentiment, is the flaring up in COVID-19 cases in some parts of Europe, which will certainly raise worries over what this means for the demand recovery. The IEA will be releasing its latest thoughts on the market on Wednesday with its Oil Market Report, and the market will certainly be watching to see what revisions are made to their demand forecasts (OIL).

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