London — Oil prices fell on Friday, erasing an earlier rise but still leaving both benchmarks on track for their biggest weekly gains since early June on the back of supply cuts caused by a storm in the Gulf of Mexico and a strike of offshore workers in Norway.
Brent LCOc1 was down 14 cents at $43.20 a barrel by 1348 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 fell 14 cents to $41.05.
Both contracts are on track for weekly gains of about 10% this week, the first rise in three weeks.
Brent’s six-month contango, a market structure where the front-month Brent futures are trading at a discount to later contracts implying current oversupply, has shrunk to around $1.90 a barrel from $3.24 less than a month ago.
In Norway, the head of the union leading an offshore worker strike told Reuters he hoped there could be a deal to resolve the wage dispute with oil companies later on Friday after a meeting with a mediator.
An escalation of the strike could almost triple the existing outage if no solution is reached by Oct. 14, taking the total capacity cut to about 934,000 barrels of oil equivalents per day.
“It goes without saying that a resolution to the conflict would pull the rug from under bulls’ feet,” PVM analysts said in a note.
In the Gulf of Mexico, Hurricane Delta has shut 1.67 million barrels per day, or 92% of the Gulf’s oil output, the most since 2005 during Hurricane Katrina. Producers have also halted nearly 62% of the region’s natural gas output, or 1.675 billion cubic feet per day.
“We believe we are soon in for an oil price correction when the Norway strike is resolved and when the hurricane in the U.S. goes away… These $40+ price levels are as fragile as glass,” Rystad’s Head of Oil Markets, Bjornar Tonhaugen, said.
The Organization of the Petroleum Exporting Countries said on Thursday world oil demand will plateau in the late 2030s and could by then have begun to decline.
*Shadia Nasralla; Aaron Sheldrick; Editing: Elaine Hardcastle; Robert Birsel & Louise Heavens – Reuters