Oil prices slipped more than 1% on Friday after an oil workers’ strike in Norway ended, which should boost crude output even as Hurricane Delta forced US energy firms to cut production. Brent futures fell 49 cents, or 1.1%, to settle at $42.85 a barrel, while US West Texas Intermediate (WTI) crude fell 1.4%, to settle at $40.60. Despite Friday's price slide, both benchmarks gained about 9% this week—their first increase in three weeks and the most significant weekly rise for Brent since June.
Oil futures climbed earlier in the week due to concerns the strike in Norway and the hurricane headed for the US Gulf Coast would cut crude output. However, Norwegian oil firms struck a wage bargain with labour union officials on Friday, ending a ten-day strike that had threatened to cut the country's oil and gas output by close to 25% next week. The firms and union officials met on Friday with a state-appointed mediator to try to end the strike in Western Europe's biggest oil and gas producing nation.
Also weighing on prices were doubts voiced by Republicans in the US Senate that a Covid-19 economic stimulus deal could be reached before the 3 November election. Oil prices took some support on Friday after US House Speaker Nancy Pelosi said she would resume talks on a possible $1.8 trillion Covid-19 stimulus package with Treasury Secretary Steven Mnuchin.
Hurricane Delta, meanwhile, dealt the greatest blow to US offshore Gulf of Mexico energy production in 15 years, halting most of the region's oil and nearly two-thirds of natural gas output. Looking ahead, JP Morgan said that a worsening global oil demand outlook due to a potential rise in Covid-19 cases this winter would likely prompt OPEC to reverse a planned easing of oil cuts in 2021, with Saudi Arabia offering deeper cuts below its current quota.
Gas Markets
Asian spot LNG prices rose last week on firm demand in the region, as well as supply concerns in the United States due to Hurricane Delta and higher European gas prices. The average LNG price for November delivery into North-East Asia was estimated at $5.50 per million British thermal units (mmBtu), $0.30 mmBtu above last week's level. The price for December 2020 delivery was at around $5.70 per mmBtu.
Demand for LNG is expected to be high in both Asia and Europe in the fourth quarter. Analysts are now expecting a substantial year-on-year increase in North-East Asia's Q4 2020 demand for LNG because of increased heating load compared to last winter. Lower nuclear output in the Far East, predominately South Korea, may also create additional LNG demand in the short term.
In the US, natural gas futures jumped to their highest since last November as production fell to its lowest in over two years after Gulf Coast energy firms shut wells ahead of Hurricane Delta and on forecasts for colder weather and higher demand in mid-October. That price increase came despite a drop in gas flows to LNG export plants in Louisiana before Delta made landfall.
