Adedapo Adesanya
By Adedapo Adesanya
Major benchmarks surged by more than three per cent as the latest development in Norway showed that the strike could reduce 25 per cent of the country’s production.
The international benchmark, Brent crude, rose $1.44 or 3.43 per cent to $43.43 per barrel while the United States West Texas Intermediate (WTI) crude gained $1.34 or 3.35 per cent to $41.29 per barrel.
The oil market had latched onto the news because any possible scenario that would close the gap between supply and affected demand was a positive factor.
On Thursday, the country’s petroleum output, Norway’s Oil and Gas Association, warned that if the strike continues beyond 14 October, the loss of daily production would thereby total 966,000 barrels of oil equivalent.
Norway’s petroleum output averages just over four million barrels of oil equivalent per day, broken down 50-50 between crude oil and other liquids and natural gas. Almost a quarter of Norwegian production would thereby disappear because of the strike.
The dispute between Lederne union and the association began when talks collapsed on September 30, prompting production outages from October 5.
The Lederne is pushing for the organisation to match the pay and conditions at onshore remote-control rooms with those of offshore workers.
In the US, oil and gas workers have withdrawn from offshore Gulf production facilities as Hurricane Delta was forecast to intensify into a powerful Category 3 storm. Nearly 1.5 million barrels of daily output was halted.
The market is welcoming supply cuts as the world is currently producing more oil than it can consume.
On the political scene, renewed optimism over some US coronavirus relief aid also supported the market.
After shutting down talks over a larger stimulus deal, President Donald Trump wrote on Twitter that Congress should pass money for airlines, small businesses and stimulus cheques for individuals, fuelling hopes for some relief.
Meanwhile, in a long term projection, the Organisation of the Petroleum Exporting Countries (OPEC) said worldwide oil demand was expected to increase by nearly 10 million barrels per day, rising to 109.3 million barrels per day in 2040, and to 109.1 million barrels per day in 2045. Global oil demand stood at 99.7 million barrels per day in 2019.
It represents a downward revision of over 1 million barrels per day when compared to the 2040 levels projected in the group’s 2019 outlook, published last November.
The cartel said it had downwardly revised its forecast for global oil demand growth over the long term, given the industry faced an existential threat this year caused by the coronavirus pandemic and as climate policies continue to shape the future of energy.
