NEW YORK (Reuters) – Oil settled above $43 a barrel on Thursday on support from output shutdowns ahead of a storm in the U.S. Gulf of Mexico and the possibility of supply cuts from Saudi Arabia and Norway.
Markets rose sharply at noon on a Dow Jones report that Saudi Arabia is considering reversing course over OPEC’s planned production increase early next year.
Brent crude settled up $1.35, or 3.2% to $43.34, after falling 1.6% on Wednesday. U.S. West Texas Intermediate (WTI) crude added $1.24 cents, or 3.1%, to $41.19 after falling 1.8% on Wednesday.
Oil also gained support from the prospect of more production outages in the North Sea because of a workers’ strike. Oil firms and labor officials said they will meet with a state-appointed mediator on Friday in an attempt both sides hope will bring an end to a strike that threatens to cut Norway’s oil and gas output by some 25%.
The Organization of the Petroleum Exporting Countries has been challenged by rising output in Libya, an OPEC member exempted from cutting output, as well as an increase in coronavirus cases in many areas of the world.
“If true, the Saudis’ decision rewards the cheaters in OPEC while acknowledging the demand challenges that are still here,” said Phil Flynn, analyst at Price Futures Group in Chicago.
“This potential extension of the cuts is definitely a positive for the markets and maybe provides the seasonal bottom that is happening anyway,” he said.
The market has also drawn support from Hurricane Delta, which is forecast to intensify into a powerful, Category 3 storm in the Gulf Coast. Nearly 1.5 million barrels of daily output was halted.
“Hurricane Delta is a crude oil supply event, and with all of this Gulf of Mexico production offline, we will probably lose more than 5 million barrels of crude oil due to the storm,” said Andrew Lipow, President of Lipow Oil Associates in Houston, Texas.
Additional reporting by Alex Lawler. Sonali Paul, Shu Zhang and Ahmad Ghaddar; editing by David Gregorio, Jason Neely and Mark Potter