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The two major storms in the Gulf of Mexico could lift oil prices as they shut in production in the Gulf.
Photo: National Hurricane CenterThe two major storms in the Gulf of Mexico could lift oil prices as they shut in production in the Gulf.
The two major storms in the Gulf of Mexico could lift oil prices as they shut in production in the Gulf.
The two major storms in the Gulf of Mexico could lift oil prices as they shut in production in the Gulf.
Besides storms in the Gulf of Mexico, analysts are looking at trouble in Libya as an oil market factor this week. In the broader view, however, the price of oil looks to be stuck in a holding pattern.
The National Hurricane Center downgraded Marco to a tropical storm, though warned of life-threatening floods in southern Louisiana. Forecasters expect to issue hurricane warnings later in the day for now Tropical Storm Laura, which is expected to make landfall in Louisiana by early Thursday.
As of Sunday, the U.S Bureau of Safety and Environmental Enforcement reported personnel were pulled from 114 production platforms, or about 18 percent of the regional offshore total. For production, a little more than half, or some 1.1 million barrels of oil per day, was idled by storm activity. Refineries may be a bigger concern as the region accounts for 54 percent of total US refining capacity, though softer demand due to the pandemic may provide a cushion.
Softer demand, meanwhile, may help explain why the price of oil has lingered around $45 for Brent for much of August. Vandana Hari, founder and CEO of Vanda Insights in Singapore, described oil as trading in a “zombie zone.”
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“This is a good time to remind ourselves that 2020 is a year bookended by an outbreak of a catastrophic pandemic and the US presidential election,” she said in an email. “Markets will now have to reckon with a zombie zone meshing the two occurrences.”
Giovanni Staunovo, a commodities analyst at UBS in Switzerland, demand will outstrip supply in the second half of year and into 2021 because of output cuts by global producers, although prices won’t move much. He expects Brent crude, the international benchmarek to hold at current levels through the second half of the year.
Elsewhere, Libya has moved from black swan to albatross. One of Africa’s largest oil producers, Libya has been unable to hold to its 1 million barrels per day achieved under Moammar Gadhafi because of its civil war. due to strains of civil war. Last week, the U.N.-backed government in Tripoli called for a cease-fire, leading to expectations that production and exports could recover. Given the spotty track record though, Anas Alhajji, an independent energy markets expert in Dallas and former chief economist at NGP Energy Capital Management, said he wasn’t buying into that scenario.
“There is no reason to believe that Libyan oil is flowing back to the market soon,” he said.
Daniel J. Graeber is a veteran energy correspondent and founder of The GERM Report, a survey of the intersection between energy and foreign affairs.
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August 24, 2020 at 06:56PM
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Oil prices could get lift as Gulf storms shut-in production - Chron
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