It’s one of those rollercoaster days as the market today seemed confused over how to interpret two opposing forces, the concern over the effect of China’s Evergrande possible default and the tight US supply signs.

The bullish side seems to be especially supported by Shell’s supply disruptions announcement as a result of damage at the West Delta-143 production hub.

Total production loss in the US Gulf of Mexico in September now seems likely to stand at about 790,000 bpd, higher than what we previously estimated. 

Based on Shell’s announcement the major supply outlook revision comes in the fourth quarter. Production from Mars, Ursa, and Olympus is likely to stay completely offline in October, and these three fields have a combined capacity of about 215,000 bpd.

Recovery from the 70,000 bpd capacity Olympus is estimated to start from November and get fully restored by December this year. 

Concerns about China’s Evergrande’s possible default erased Tuesday’s early gains as trading moved from East to West, but now traders seem to be settling on a consensus that supply news from the US have higher gravity.

Evergrande news caused some market panic as traders worried that it could trigger a domino effect in China’s major debt-driven companies, and a rollover bearish effect for stocks and commodity prices.

However, given that all Chinese major banks and lending institutions are controlled by the government, there is a ray of hope in the market that the second biggest economy in the world would be able to absorb shock waves from the Evergrande, and the effect on markets and commodities will be minimal. 

The US Fed meeting is also kicking off today and with the US dollar falling from its 4-week high, traders are drawing some bullish sentiments as cheaper dollar supports higher commodity prices.

The Fed meeting is also significant as the US job market has consistently improved in the last few months and no new major outbreak of Covid-19 has hit the US, so markets now await to see how the world’s biggest economy may pave the way out of state support to normality.