Crude oil prices recovered to above the $40 barrier for both benchmarks after sharp falls a week earlier. Brent crude advanced to $42.85 per barrel while WTI gained to $40.60 per barrel.
It represented a substantial uplift in an otherwise tight trading range environment.
The Brent/WTI price spread rose to $2.25 per barrel, which means that both benchmarks are moving in parallel momentum.
Hurricane Delta led to a huge outage of about 90 percent of production (or about 5 million barrels per day of medium sour crude oil) from the US Gulf of Mexico.This was the main contributor to the rise in prices over the week.
Although latest data from the EIA showed that US crude oil production hit a nine-week high of 11 million barrels per day (bpd), that may not have yet reflected the shutdown of offshore oil platformsr. This type of crude oil is mostly used for middle distillate refined petroleum products such as diesel and Jet kerosene. As long as travel by road and air remains impacted by the coronavirus, refining margins for such products also remain under pressure.
The next test will come as refineries prepare to process crude for heating fuel as the market awaits signs of whether a severe or mild winter is coming.
Though the global oil market in general and the US oil market in particular have already factored in such output shutdowns and reduced refinery runs, the bigger worry is the growing uncertainty around the second wave of the coronavirus that has forced some countries to consider reverting to either full or partial lockdowns.
The likely fallout for air travel, which is already in a parlous state and accounts for almost 8 percent of global oil demand, is a concern.
An oil industry strike in Norway also helped to buoy prices, however it is unlikely to figure next week after a pay deal was reached.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq
