By Adedapo Adesanya
Oil futures finished higher on Tuesday as another major storm cut energy output in the Gulf of Mexico even as the market continued to feel the impact on worsening demand from the ongoing rise globally in COVID-19 cases.
As a result, the price of the Brent crude oil went up by 1.78 per cent or 72 cents to $41.18 per barrel while the United States’ futures, West Texas Intermediate (WTI) crude appreciated by 2.39 per cent or 92 cents to $39.47 a barrel.
Tropical Storm Zeta in the United States has forced evacuations of offshore production platforms in the Gulf of Mexico.
This hurricane season has caused shutdowns which have put significant pressure on US oil production and pushed it to 9.9 million barrels per day.
The additional support from Tropical Storm Zeta comes at a time when the market is worried about the impact of the second wave of coronavirus.
Zeta is forecast to approach the northern Gulf Coast on Wednesday and make landfall late Wednesday or Wednesday night.
The disruption from the storm will put pressure on oil production in the country as it will keep the total production levels way below the recent 11 million barrels per day in the near term.
The storm-induced bump in prices may be short-lived, however, with demand expected to weaken anew with coronavirus cases rising.
In the latest round of development, Europe’s daily coronavirus related deaths rose by nearly 40 per cent compared with the previous week, the World Health Organization (WHO) said on Tuesday.
Russia reported a daily record of 320 deaths, pushing the tally to 26,589. There has been a sharp increase in Italy too, with 221 fatalities announced in the past 24 hours. The total number of fatalities in Austria went above 1,000 on Tuesday.
Russia has the world’s fourth-highest number of COVID-19 cases after the US, India and Brazil. It recorded another 16,550 infections on Tuesday alone and authorities have now made the wearing of face masks compulsory in all crowded places.
And in Belgium, doctors have been asked to keep working, even if they have the virus because the health system is in danger of being overwhelmed.
With the demand hit expected from this, the market is also facing fire from developments in Libya. The North African country’s production should rebound to 1 million barrels per day in the coming weeks.
This will further complicate efforts by other members and allies of the Organization of the Petroleum Exporting Countries (OPEC) to restrict output.
Business Post had been reported that the alliance known as OPEC+, is planning to increase production by 2 million barrels a day from January after record output cuts this year. That would cut overall reductions to 5.8 million barrels per day, still an enormous amount by the standards of major oil producers, but it may not be enough to offset weak demand.
The latest weekly US oil inventory figures are due on Wednesday and are expected to show rising supplies which will further add to the bearish factors.
Modupe Gbadeyanka