Output cuts help push oil above $42

London — Oil rose above $42 a barrel on Thursday, supported by output shutdowns in the US Gulf of Mexico and the prospect of more supply losses in Norway, as well as by hopes for some US coronavirus relief aid.

Oil and gas workers have withdrawn from offshore US Gulf production facilities as Hurricane Delta was forecast to intensify into a powerful category three storm. Nearly 1.5-million barrels of daily output was halted.

Brent crude rose 59 US cents, or 1.4%, to $42.58 a barrel by 8.12am GMT, after falling 1.6% on Wednesday. US West Texas Intermediate crude added 45c, or 1.1%, to $40.40 after falling 1.8% on Wednesday.

“If Delta stays weak, the oil rally could quickly run out of steam,” said Jeffrey Halley, analyst at brokerage Oanda.

Oil also gained support from the prospect of more production outages in the North Sea because of a workers’ strike. The Johan Sverdrup field, the North Sea’s largest, will have to shut production unless the strike ends by October 14.

The production losses offset concerns about weak demand, rising coronavirus cases and an increase in US crude inventories as reported by the Energy Information Administration.

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 Congress should pass money for airlines, small businesses and stimulus cheques for individuals, fuelling hopes for some relief.

Oil collapsed to historic lows in April due to the coronavirus crisis, with Brent falling to a 21-year low below $16. A production cut led by Opec helped boost prices.

Opec now faces a new challenge from rising output in Libya, an Opec member exempted from cutting output. 

Reuters