Oil Falls Below $40 With Supply Constraints Beginning to Ease

(Bloomberg) — Oil fell for a second day as operations in the U.S. Gulf of Mexico started to resume following Hurricane Delta and Libya took a major step toward reopening its biggest field.

Futures in New York dropped below $40 a barrel after closing down 1.4% Friday as oil workers in Norway called off a strike. Crude explorers and tugboat operators got back to work on Saturday after Delta, which had seen about 92% of oil production and 62% of gas output shuttered. The hurricane and hopes for more U.S. fiscal stimulus contributed to a price jump of almost 10% last week.

Libya’s National Oil Corp. lifted force majeure on the western deposit of the Sharara field and instructed its operator to resume production, according to a statement on Sunday. Sharara’s output will reach its daily capacity of almost 300,000 barrels in 10 days, a person with knowledge of the situation said.

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Oil Tapering

The resumption of supply from the North African country is an added headache for the OPEC+ alliance as it considers whether to proceed with a plan to restore more output in January. With coronavirus cases accelerating in many countries, the group faces a tough decision at its next policy meeting on Nov. 30-Dec. 1.

Prices

West Texas Intermediate for November delivery fell 1.5% to $39.99 a barrel on the New York Mercantile Exchange at 8:18 a.m in Singapore.The contract rose 9.6% last week.Brent for December settlement dropped 1.5% to $42.22 on the ICE Futures Europe exchange after declining 1.1% on Friday.

Iraq expects crude prices to remain at around $41 to $42 a barrel this year before rising to $45 in the first quarter of 2021, the state-run Al-Sabah newspaper reported, citing an interview with Oil Minister Ihsan Abdul Jabbar. The minister reiterated that Iraq, OPEC’s second-biggest oil producer, would continue to comply with the OPEC+ pact to curb output.

Drilling activity in the U.S., the world’s largest producer, is starting to pick up despite signs demand might not recover to pre-virus levels until 2022 or 2023. Active rigs targeting crude oil rose by 4 to 193 last week, according to Baker Hughes, an increase of 14 in the last three weeks.

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