(Bloomberg) — Oil steadied after the biggest gain in more than two weeks as Hurricane Francine hit crude-producing regions in the Gulf of Mexico, and traders looked ahead to market insights from the International Energy Agency.
Most Read from Bloomberg
Brent crude traded near $71 a barrel after a 2.1% advance on Wednesday in a volatile session, with West Texas Intermediate above $67. Hurricane Francine — which made landfall in Louisiana on Wednesday night — has forced the shut-in of about 670,000 barrels a day of production, or almost 39% of the total, the US Bureau of Safety and Environmental Enforcement said.
Crude is still markedly lower year-to-date, with steep declines spurred by concerns about weakening demand in top importer China, as well as signs of a US slowdown. The slump has forced producer cartel OPEC+ to delay a planned relaxation of supply curbs by two months.
Fears over Hurricane Francine are dominating, with “any disruptions in production likely to tighten supplies in the near term,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte. Still, recent price declines mean “traders are increasingly convinced of an economic slowdown, which will dent the demand for fuel globally.”
Later Thursday, the IEA will release its monthly analysis, offering insight into conditions in 2025. Last month, the Paris-based group said inventories were going to build next year even if OPEC+ canceled its supply increases.
Reflecting the weakness, widely watched timespreads have narrowed. The gap between Brent’s two nearest December contracts — a preferred gauge for traders to price long-term expectations — was last at $1.24 a barrel in backwardation. That compares with a high of more than $3 last week.
Volatility, meanwhile, has risen as traders digest a challenging outlook in wider markets. Implied volatility for Brent is near the highest in five weeks.
Crude’s plunge has led to renewed bearish calls from oil watchers, with Citigroup Inc. and Trafigura Group calling for Brent to linger in the $60s a barrel range. Citigroup’s head of commodities research, Max Layton, said oil’s recent rout meant there was no need for extra OPEC+ supply.
To get Bloomberg’s Energy Daily newsletter into your inbox, click here.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.