U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Monday after giving up earlier gains. Traders are reacting to reports of a tropical storm in the Gulf of Mexico region that is stopping some production, but not as much as recent Hurricanes Laura and Sally, the return of oil output in Libya and rising coronavirus cases in Europe that could further dent global demand.
A steep drop in global equity markets is helping to drive the U.S. Dollar higher, which could also be weighing on demand for dollar-denominated crude oil.
Oil companies are taking some precautions ahead of the arrival of the latest storm. Royal Dutch Shell Plc halted some oil production and began evacuating workers from a U.S. Gulf of Mexico platform, the company said on Saturday.
Tropical Storm Beta was predicted to bring 1 foot of rain to parts of coastal Texas and Louisiana as the 23rd named storm of this year’s Atlantic hurricane season moves ashore on Monday night, the National Hurricane Center said.
Libya Lifts Force Majeure
Libya’s National Oil Corp lifted force majeure on what it deemed secure oil ports and facilities on Saturday, but said the measure would remain in place for facilities where fighters remain.
“The market can ill afford more crude hitting the market,” ANZ analysts said in a note on Monday.
Resurgence of COVID-19 Cases Raising Demand Fears
A resurgence of virus cases globally is also acting as a brake on crude demand. More than 30.78 million people have been reported to be infected by the novel coronavirus globally and 954,843 have died, according to a Reuters tally.
We could see a choppy trade over the next two days with the storm providing a possible floor, and the rise in coronavirus cases cutting further into demand.
There are still plenty of variables to deal with such as the exact location of landfall and the strength of the storm. These uncertainties are providing some support. Once they are lifted, prices are likely to resume their downtrend because of demand concerns.
Speaking of demand concerns, the rising global COVID-19 cases is a bearish issue. It looks as if the pandemic is not going away soon, but hurricanes come and go. Look for short-term betting to favor the downside.