0225 GMT: Crude oil futures were steady during mid-morning Asian trade Oct 13, maintaining overnight losses, as production capacity in the US Gulf of Mexico started to come back online, heightening concerns of a supply glut amid an unimproved demand outlook.
At 10.25 am Singapore time (0225 GMT) ICE Brent December crude futures were up 1 cent/b (0.02 %) from the Oct. 12 settle to $41.74/b, while the NYMEX November light sweet crude contract was up 2 cents/b (0.05%) at $39.45/b. Both international crude markets had dived 2.64% and 2.88% to settle at $41.72/b and $39.43/b, respectively, on Oct. 12, after supply disruptions caused by a Norwegian labor strike and a hurricane in the US Gulf of Mexico were resolved.
In the US Gulf of Mexico, after the dissipation of Hurricane Delta, oil and gas producers have begun resuming production, and have thus far found little serious damage to their infrastructure, S&P Global Platts reported on Oct. 12.
According to data by the US Bureau of Safety and Environmental Enforcement, over 400,000 b/d of offshore crude production was back online as of Oct. 12, after Delta had shuttered 91%, or 1.697 million b/d, of production capacity on Oct. 10.
"The crude oil market was under pressure from easing supply concerns. BHP and Chevron said they would begin restoring operations at the US Gulf oil platforms affect by Hurricane Delta. The storm had shut about 90% of oil production in the gulf, but the region appears to have sustained little damage," an ANZ analyst said in an Oct. 13 note.
On a slightly bullish note, due to the shut-downs necessitated by Delta, analysts surveyed by Platts expect a US commercial crude inventory draw of 2.3 million barrels in the week ended Oct. 9. Such a draw would bring total commercial inventories down to about 490.6 million barrels, putting them only 11.9% above the five-year average of US Energy Information Administration data -- the tightest overhang since May.
Regardless, the upcoming return of barrels from the US Gulf of Mexico could lead to a supply glut in the oil markets, especially since it coincides with Libya's National Oil Corp lifting the force majeure on the Sharara oil field -- the country's largest with a 300,000 b/d capacity -- equivalent to current Libyan production combined.
"The Libyan Oil supply's permanency is proving to be one of the biggest headaches for OPEC and oil bulls alike," Stephen Innes, chief market strategist at AXI, said in an Oct. 13 note.
Meanwhile, the resurgent coronavirus pandemic continues to threaten renewed lockdown restrictions, which will impede global economic recovery and sap oil demand.
Edward Moya, senior market analyst at OANDA, said in an Oct. 13 note: "Energy markets are looking beyond hurricane season and [are] focused on the glut concerns as the demand outlook appears vulnerable to restrictive measures since the northern hemisphere can't get the virus under control before the dreaded winter wave."
