Oil prices dropped 1% for a second straight session on Monday as U.S. producers began restoring output post-Hurricane Delta, and after a labour strike affecting Norwegian production came to an end.
Brent crude LCOc1 for December fell 41 cents to $42.44 a barrel by 0650 GMT and U.S. West Texas Intermediate CLc1 for November was at $40.18 a barrel, down 42 cents.
Front-month prices for both contracts gained more than 9% last week, the biggest weekly rise for Brent since June. But both fell on Friday after Norwegian oil firms struck a deal with labour union officials, ending a strike that threatened to cut the country’s oil and gas output by close to 25%.
“We had good support for both Brent and West Texas on the back of some supply concerns,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Hurricane Delta, which dealt the greatest blow to U.S. Gulf of Mexico energy production in 15 years, was downgraded to a post-tropical cyclone at the weekend.
Workers headed back to production platforms on Sunday, and Total SA TOTF.PA was working to restart its 225,500 barrel-per-day Port Arthur, Texas, refinery.
Colonial Pipeline, the largest oil products pipeline in the United States, had to shut its main distillate fuel line, however, after the hurricane disrupted power, the company said on Sunday.
Despite the storm’s impact, oil prices of around $40 a barrel over the past few months encouraged U.S. energy firms to add oil and natural gas rigs for a fourth week in a row last week, data from Baker Hughes showed.
Elsewhere, production in Libya – a member of the Organization of the Petroleum Exporting Countries – is expected to rise to 355,000 barrels per day on Monday after force majeure was lifted on the Sharara field from Sunday.
ING analysts said reports suggest it would take 10 days for output from the Sharara field to reach its capacity of 300,000 bpd, which would lift Libya’s output back to about 600,000 bpd.
This would not be “helping OPEC+ in the task of rebalancing the market,” the analysts said.
OPEC and its allies including Russia, a grouping known as OPEC+, have agreed to reduce output by 7.7 million bpd from August to support oil prices.
Global markets were also focused on the outcome of the U.S. presidential election in November, which could alter energy policies in the world’s biggest oil consumer and one of its biggest producers.
Several analysts expect U.S. presidential hopeful Joe Biden to pursue a deal with Iran that could lead to more oil supplies.
Goldman Sachs said, though, the election’s outcome would not derail its bullish oil and gas outlook next year even if Biden wins, since talks with Iran would be gradual, with a full resolution unlikely before 2022.
“The longer it takes to reach the targeted ‘stronger and longer’ Iranian deal, the more negligible its bearish impact given the ongoing under-investment in new supply that is set to push oil prices materially higher through the rest of this decade,” Goldman’s analysts said.