Oil gains as storm causes U.S. gulf production halts
Oil prices rose on Monday as a tropical storm in the Gulf of Mexico forced companies to evacuate rigs and halt production, but gains were kept in check by wider concerns about excess supply and falling fuel demand.
Both contracts ended last week lower, falling for a second week in a row.
Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane. The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region.
Typically oil rises when production is shut, but with the coronavirus pandemic getting worse demand concerns are to the fore, while global supplies continue to rise. The U.S. is the world’s biggest oil consumer and producer.
In Libya, commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market, although it was unclear if oil fields and ports would begin operations.
“The announcement that the blockade of Libyan oil export terminals may be about to end will add to the woes of OPEC+’s meeting this week,” said Jeffrey Halley, senior market analyst at OANDA.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, a grouping known as OPEC+, meets on Sept. 17 to discuss compliance with deep cuts in production, although analysts don’t expect further reductions to be made.
Also supporting prices, drillers cut the number of oil and gas rigs for the first time in four weeks last week.