(Bloomberg) — Oil was steady after a third straight weekly gain as the threat of back-to-back storms hitting the U.S. Gulf Coast and disrupting production was offset by signs of a coronavirus resurgence in parts of Asia and Europe.
October futures traded near $42 a barrel in New York after falling 1.1% on Friday. Almost 60% of crude output in the U.S. Gulf of Mexico production was closed as of midday Sunday as the region prepared for two approaching hurricanes. The systems — Marco and Laura — are coming from different directions and have the potential to cause billions of dollars in damage.
Governments around the world, meanwhile, continue to tread a fine line between trying to halt the spread of Covid-19 and efforts to re-open their economies. While the pandemic is showing signs of stabilization in the U.S., it appears to be staging a comeback in Europe and Asia.
U.S. benchmark crude futures have been rising — albeit very gradually — this month amid a steady decline in domestic crude and gasoline supplies, and tentative signs that demand is returning. That’s starting to encourage the return of production, however, with drillers in the Permian Basin of West Texas and New Mexico putting an additional 10 rigs to work last week for the biggest jump in activity this year.
”What’s going to keep the brakes on the price is what U.S. oil supply is going to do,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia. While the hurricanes are positive for prices, they’re very temporary, but the rising U.S. oil rig count reaffirms that spare capacity can come back and is enough to meet any price increase, he said
Brent’s prompt timespread suggests concerns about over-supply are increasing. It was 57 cents a barrel in contango — a market structure where prompt contracts are cheaper than later-dated ones — compared with a contango of 22 cents at the end of July.
Libya’s National Oil Corp. said Friday that it welcomed the country’s new cease-fire agreement and the nation should be able to resume exports when all of its facilities are freed from military occupation, potentially unleashing even more new supply at a time when the OPEC+ alliance is easing output curbs.
Other market drivers
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