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Oil poured into the markets

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Oil prices may come under pressure in the coming weeks, as several factors supporting the quotes have ceased to operate. So, in Norway, an end was put to the strike, which could reduce production in the country by 1 million barrels per day. In the United States, the Gulf of Mexico oil industry is preparing to resume operations shut down by Hurricane Laura. And Libya is going to restore production at its largest field. Together, these factors can return at least 2.5 million barrels per day to the market in a situation where demand is under pressure due to the prospects for new coronavirus restrictions.
The Norwegian oil industry and the Lederne union reached an agreement on October 9 to end the strike since September 30. Workers were unhappy with the cut in wages following the decision of oil companies to transfer some of the management functions from offshore facilities to onshore control centers. By the end of the strike, the strike had already led to a decline in production at the Kvitebjorn, Valemon, Gudrun, Gina Krog (Equinor), as well as Neptune Gjoa and Vega (Wintershall Dea) fields with a combined volume of 330 thousand barrels per day (b / d).
In addition, if the parties did not come to an agreement, from October 14, production could be stopped at one of the largest fields in the North Sea, Johan Sverdrup, which would lead to a decrease in total production by 1 million b / d. The possibility of such an outcome was one of the main drivers of oil prices, which rose from a low of $ 39 per barrel of Brent on October 2 to $ 43.5 on October 8. However, on October 9, on the news of the end of the strike, the quotes fell by 1.3%.
The hurricane, according to the US Bureau of Safety and Environmental Control, led to a halt of 92% of production in the region, or 1.7 million b / d, as of October 10. This is a record high since 2005, when New Orleans was destroyed by Hurricane Katrina. However, already on October 11, companies began to return personnel to the platforms, and full recovery of production is a matter of several weeks.
At the same time, on October 11, the Libyan National Oil Company announced the lifting of restrictions on the production of the country’s largest Sharara field as a result of negotiations between the parties to the Libyan conflict (see Kommersant on September 22). In practice, this means that production in the country could grow by 100,000 bpd in the coming days, and by another 200,000 bpd by the end of the month, according to Platts.
This is happening in a situation where in most countries there is an increase in the number of coronavirus cases, and many analysts do not exclude the return of at least part of the spring restrictions, which will negatively affect oil demand. In addition, in the fourth quarter, the demand for oil always decreases due to the end of the holiday season in the Northern Hemisphere. At the same time, the current quotas of the OPEC + countries, which have agreed to reduce oil production, in January should be revised upwards as planned, which will allow another 2 million bpd to enter the market. In early October, rumors emerged that Saudi Arabia might propose to adjust the parameters of the OPEC + deal amid increasing risks of a second wave of coronavirus.
The injection of this amount of funds will inevitably lead to an increase in stock and commodity markets. “Even if Congress fails to reach an agreement before the presidential election (in the US on November 3 – Kommersant), financial markets are confident that something will be done quickly when the outcome of the election is determined,” said Edward Moya, senior analyst at OANDA.
Yuri Barsukov

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