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Crude Oil Bounces as Yet Another Hurricane Shuts in Gulf Rigs

Published 10/27/2020, 12:48 PM
Updated 10/27/2020, 12:50 PM
© Reuters.
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By Geoffrey Smith 

Investing.com -- Crude oil prices bounced strongly on Tuesday after heavy losses on Monday, as the approach of Hurricane Zeta heralded yet another shut in of production in the Gulf of Mexico.

By 12:35 PM ET (1635 GMT), U.S. crude futures were up 2.5% at $39.54 a barrel, while Brent futures were up 2.0% at $41.62 a barrel. That’s nearly $2/barrel higher than Monday’s lows.

U.S. gasoline RBOB futures were up 2.7% at $1.1265 a gallon.

Monday’s selling had been caused by fears that the spreading pandemic could again hit fuel demand in North America and Europe. However, the virus’ trajectory looks considerably better in China and India, two other major importing regions. India is currently posting its lowest infection figures in months.

Zeta, which is expected by the National Hurricane Center to make landfall somewhere around eastern Louisiana on Wednesday, is the 11th hurricane of this year’s season. A usual season has six. Each evacuation of platform workers has been made more complicated this year by the coronavirus pandemic, which has required workers all to be tested before returning to work each time.

Concerns about oversupply are likely to remain, though, until the OPEC+ formally signals a delay to a production increase of nearly 2 million barrels a day that is, for now, still scheduled for January 1. The world market is also having to absorb increasing amounts of oil from Libya, which isn’t covered by the output restraint deal.

Bloomberg cited a person familiar with the matter as saying that the North African country had raised its production to over 700,000 barrels a day as of Monday. Analysts expect that to rise to over 1 million barrels a day within a month.

Overnight, U.K. major BP (NYSE:BP) had kicked off the earnings season for the sector with a relatively upbeat report, indicating that it could resume stock buybacks as early as the fourth quarter of next year. However, the short-term pressure on producers remained in evidence as newswire reports pointed to around 25% of staff at Cenovus and Noble Energy (NASDAQ:NBL) losing their jobs in the wake of mergers with Husky Energy (OTC:HUSKF) and Chevron (NYSE:CVX), respectively.

BP Chief financial officer Murray Auchincloss meanwhile observed that fuel demand still remains around 15% below year-earlier levels.

 

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