Oil inches up after 5% slide overnight as hurricane shuts U.S. output

In this news, we discuss the Oil inches up after 5% slide overnight as hurricane shuts U.S. output.

SINGAPORE / MELBOURNE (Reuters) – Oil prices rebounded slightly on Thursday after falling 5% in the previous session, supported by the prospect of a tight supply in the near term to two-thirds of the US production shut down in the Gulf of Mexico as Hurricane Zeta slammed Louisiana.

Market watchers said technical support was a factor as well, after signs of a growing glut in global oil supplies and a second wave of coronavirus infections pushed prices down on Wednesday.

U.S. West Texas Intermediate (WTI) crude futures edged up 7 cents, or 0.19%, to $ 37.46 a barrel at 5:17 a.m. GMT, while futures on the U.S. Brent rose 4 cents, or 0.10%, to $ 39.16 a barrel.

WTI in the $ 36.45 to $ 36.95 range has proven to be a “buy zone” since early September, said Axi chief market strategist Stephen Innes. If the market fell through this, it would be a bearish sign, he said.

The impact of Hurricane Zeta is expected to be short-lived and the return of US production will add to existing oversupply, with Libya rapidly ramping up production after an eight-month blockade.

Zeta is expected to weaken into a gale force non-tropical low by Thursday morning in the United States, the Florida-based National Hurricane Center said.

Data from the US Energy Information Administration on Wednesday provided further evidence of the growing glut: US crude inventories rose 4.3 million barrels in the week of October 23, a larger than expected increase.

The surge in COVID-19 cases in Europe, which has led to new restrictions preventing people from moving, is casting a shadow over the market. Oil fell mid-morning in Asia before rising slightly.

France will require people to stay at home for all activities except essential activities from Friday, while Germany will close bars, restaurants and theaters from November 2 until the end of the month.

“The resurgence of the pandemic is putting pressure on OPEC to delay its planned production increase in January,” ANZ Research said in a note.

The Organization of the Petroleum Exporting Countries and its allies, together called OPEC +, plan to reduce their production cuts in January 2021, from 7.7 million barrels per day (bpd) to around 5.7 million bpd.

Meanwhile, prospects for the bitter trade conflict between China and the United States, whose relations have fallen to the lowest point in decades on a range of issues, remain unclear.

In an interview with Reuters six days before next week’s US election, top advisers to Joe Biden said he would consult with key US allies before deciding the future of US tariffs on China, seeking a ” collective leverage “to strengthen his hand against Beijing if elected president.

Reporting by Shu Zhang and Sonali Paul; Edited by Kenneth Maxwell and Tom Hogue

Original © Thomson Reuters

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