By Geoffrey Smith
Investing.com -- Crude oil prices slipped from overnight highs in early trade in New York on Friday but remained on course for gains of nearly 10% this week, thanks to production disruptions in the Gulf of Mexico and Norway – and to hopes that OPEC and its allies will shelve their plans to raise output at the end of the year.
By 9:25 AM ET (1325 GMT), U.S. crude futures were down 0.3% at $41.07 a barrel, while the international marker Brent was down 0.3% at $43.20 a barrel. Both had hit their highest levels in over two weeks overnight.
U.S. Gasoline RBOB futures, meanwhile, were down 1.8% at $1.2094 a barrel.
Hurricane Delta is currently approaching the Louisiana coast, having already caused over 90% of production in the Gulf of Mexico – nearly 2 million barrels a day – to shut down as a precaution.
In addition, a strike by Norwegian oil workers is set to extend into a second week, threatening to cut the country’s output by a quarter.
“Oil has enjoyed a week of impressive gains,” Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen said in e-mailed comments. “Yet this week’s gains are not caused by factors that are here to stay and they are only sustainable for a short period of time. Hurricanes that curb production in the U.S. will subside and output will rise again, and the same applies with strikes in Norway.”
Tonhaugen said that price levels in WTI above $40 a barrel are “as fragile as glass nowadays” due to the worsening demand picture: spreading coronavirus infections in Europe, in particular, are translating into lower levels of driving activity, while London Mayor Sadiq Khan warned that a fresh lockdown in the U.K. capital is “inevitable”.
The best hope for fundamental support arguably lies in further output discipline from OPEC and its allies. The Wall Street Journal reported earlier in the week that both Saudi Arabia and Russia, the biggest of its non-OPEC partners, were looking at postponing an increase in output that is scheduled for the start of next year, owing to weak global demand.
Russian Energy Minister Alexander Novak told local media on Friday that “we need to keep our finger on the pulse, we need to cooperate…to create normal market conditions.”
However, a report by S&P Global Platts earlier Friday showed that Russia had not kept strictly to its production quota under the current OPEC+ deal in August, a development that may complicate any fresh deal to extend the current output restraint.