Oil futures lost ground early Friday, but the U.S. benchmark remains on track for a 10% weekly advance as Hurricane Delta nears landfall on the U.S. Gulf Coast and a strike curtails a large chunk of Norway’s crude output.
Oil has enjoyed a week of impressive gains, but the rise has “not been caused by factors that are here to stay,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in emailed commentary.
“Hurricanes that curb production in the U.S. will subside and output will rise again,” he said. “The same applies with strikes in Norway,” so both market events, in a way, are “artificial.”
West Texas Intermediate crude for November delivery
on the New York Mercantile Exchange fell 15 cents, or 0.4%, to $41.04 a barrel, but was set for a weekly rise of 10.7%.
The global benchmark, December Brent crude
fell 19 cents, or 0.4%, to 43.15 a barrel on ICE Futures Europe, with prices up 9.95% for the week.
If the Norway strike remain unresolved, the country’s largest North Sea oil field could be forced to shutdown by next week, which would bring production cuts to just under 1 million barrels a day, according to Commerzbank.
Tonhaugen points out that prices had climbed on news of the strike, but then eased back as news surfaced that the union and oil firms plan to meet with a mediator in an effort to resolve the situation.
When the strike is over, supply will return in a market where demand is hurt by restrictions put in place to curb the rising cases of COVID-19, said Tonhaugen.
Losses for oil may also show that the “market is more worried about refineries shutting down in the wake of Hurricane Delta and sending crude oil to storage, than it is of crude oil production being shut in,” said Robert Yawger, director of energy at Mizuho Securities, in a note.
Hurricane Delta, a major Category 3 hurricane with sustained winds of 120 miles per hour, was expected to make landfall on the Louisiana coast later Friday.
The Bureau of Safety and Environmental Enforcement on Thursday estimated that around 91.5% of current oil production in the Gulf of Mexico had been shut in as a result of the storm, along with 61.8% of natural-gas output.
On Nymex Friday, November gasoline
fell by 1.9% to $1.2090 a gallon, but still trade up by around 7.6% for the week. November heating oil shed 0.1% to $1.1911 a gallon, trading up 9.8% for the week.
November natural gas
traded at $2.782 per million British thermal units, up up 5.9% in Friday dealings, and looking at a weekly rise of 14%.