DTN Oil

WASHINGTON (DTN) -- In early trade Monday, nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange shifted lower, with the U.S. crude benchmark falling below $40 barrel (bbl) as producers in the offshore Gulf of Mexico began restoring operations at platforms shut-in by Hurricane Delta. In addition, Libya will lift a force majeure at its largest oil field El-Sharara, potentially bringing up to 500,000 barrel per day (bpd) of additional supplies into a glutted market reeling from pandemic-induced depressed demand.

In early trading, November West Texas Intermediate futures fell below $40 bbl to trade near $39.95 bbl and ICE December Brent contract eased 60 cents to $42.24 bbl. NYMEX November ULSD futures retreated 2.05 cents to $1.1732 gallon and November RBOB futures dropped back 1.63 cents or 1.3% to $1.1878 gallon.

U.S. dollar firmed off a 3-week low in index trade against a basket of foreign currencies to 93.255, further pressuring WTI futures.

Producers in the U.S. Gulf of Mexico began re-staffing evacuated oil and gas platforms after Hurricane Delta struck the Louisiana-Texas coastline at Category 2 strength on Friday. Hurricane Delta halted nearly 92% or 1.7 million bpd of offshore crude production in Gulf waters -- the most on record, according to data from the U.S. Bureau of Safety and Environmental Enforcement.

Traders continue to assess disruptions to the U.S. Gulf Coast energy infrastructure following Hurricane Delta, with early reports indicating Total's SA 225,500 bpd refinery lost power and Valero Energy Corp.'s 335,000 bpd refinery was forced to shut a cooling tower due to the storm. A loss of power forced Colonial Pipeline's 1.4 million bpd gasoline line to briefly shut, with operations restored late Saturday while a power outage shut the 1.2 million bpd distillate fuel line late Saturday.

Internationally, Libya's National Oil Company announced Sunday it would lift a force majeure on the country's largest oil field, El Sharara, this week. With Libyan oil production already at around 350,000 bpd, the return of El Sharara field could add another 300,000 bpd in output quickly. Earlier this month, Goldman Sachs forecasted Libya's crude oil production would reach up to 500,000 bpd by the end of the year and up to 1.5 million bpd early next year.

Labor unions in Norway confirmed news that a deal with the country's oil companies to raise wages for onshore workers to equal that of offshore workers has ended a 2-week strike at the six oil and gas producing fields. Norway's strike could have potentially disrupted up to 25% or 968,000 bpd of the country's crude output, with the Johan Sverdrup oil field with capacity of 485,000 bpd scheduled to be forced shut by worker action if a resolution wasn't reached by Wednesday (10/14).

Abundant crude oil supply is contrasting with more lockdowns in Europe, with the European Union grappling with what looks to be a second wave of coronavirus infections that has already triggered new restrictions on mobility and closures of nonessential businesses. Europe's daily infections rose above 100,000 a day on Sunday, surpassing a previous record set during the height of the pandemic back in March-April. Germany introduced a 10-day ban on gatherings of more than 10 persons indoors and Spain announced a state of emergency in Madrid, limiting all nonessential travel across the city. The potential resurgence of COVID-19 cases and the lack of accessible vaccine continue to be two major risks for near-term global oil demand.

Liubov Georges can be reached at liubov.georges@dtn.com

(c) Copyright 2020 DTN, LLC. All rights reserved.