DTN Oil

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange eroded in afternoon trade Monday on increasing oil production, as shut-in wells in the Gulf of Mexico gradually return following Hurricane Delta, a worker's strike in Norway that forced shut output was settled, and Libyan oil production is climbing with the partial restart of El Sharara, Libya's largest oil field, following months of lost output amid a civil war.

On the session, November West Texas Intermediate futures settled more than $1 lower at $39.43 barrel (bbl) and ICE December Brent slumped $1.13 to $41.72 bbl. NYMEX November ULSD futures retreated 3.62 cents to a $1.1571 gallon settlement and November RBOB futures dropped back 2.75 cents or 2.4% to $1.1757 gallon.

U.S. producers have returned more than 20% of shut-in oil output in the Gulf of Mexico following a fast-moving Hurricane Delta's landfall Friday. The Bureau of Safety and Environmental Enforcement reported Monday afternoon that 69% or 1.3 million barrels per day (bpd) of oil production in Gulf waters is still shut-in.

The longer-term threat for market bulls is returning oil production from Libya, where Libya's National Oil Company on Sunday announced it is resuming output at the 350,000 bpd El Sharara oil field as peace talks between forces loyal to General Khalifa Haftar and the United Nation's recognized government in Tripoli progress. Analysts indicate oil production from the north African nation could reach 500,000 bpd by end year.

The Organization of the Petroleum Exporting Countries will need to consider how greater Libyan oil production effects the 7.7 million bpd production cut by OPEC+, which is set to decline to 5.7 million bpd on Jan. 1, 2021. Saudi Arabia late last week suggested they would advocate for delaying the 2 million bpd production increase until their Nov. 30-Dec. 1 meeting, although the issue could arise later this week during an OPEC+ Joint Ministerial Monitoring Meeting scheduled for Thursday (10/15).

Climbing oil production is coming amid the potential for additional restrictions on mobility as what is being called a second wave of coronavirus infections sweeps through major economies in the European Union. Daily infections in the EU have topped 100,000 a day this weekend, surpassing the previous record set during the height of the pandemic in March and April. Germany introduced a 10-day ban on gathering of more than 10 persons indoors and Spain announced a state of emergency in Madrid, limiting all nonessential travel across the city.

OPEC and the International Energy Agency will provide their short-term outlooks of the global oil market Tuesday and Wednesday, respectively.

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

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