Investing.com — Oil prices were higher in early US trading on Wednesday despite paring back some earlier gains, as traders waited to assess the impact of Hurricane Francine on production in the Gulf of Mexico.
Prices also took some support from industry data showing an unexpected weekly draw in U.S. oil inventories.
But oil markets were nursing steep losses from Tuesday, as disappointing Chinese import data and a cut to the Organization of Petroleum Exporting Countries’ demand forecast presented a dour outlook for oil markets.
Brent oil futures expiring in November rose 0.9% to $69.85 a barrel, while West Texas Intermediate crude futures ticked up by 1.3% to $66.58 per barrel by 10:03 ET (14:03 GMT).
Francine becomes a hurricane, Gulf of Mexico production impacted
Francine became a category-one hurricane on Tuesday evening, with the storm set to make landfall in Louisiana on Wednesday.
The storm is set to cut a path of destruction across the American mid-South in the coming days, and saw a slew of oil and gas producers halt output in the Gulf of Mexico/
The region accounts for about 15% of U.S. oil production, with any disruptions in production likely to tighten supplies in the near-term.
US inventories see unexpected draw – API
Data from the American Petroleum Institute showed U.S. oil inventories saw a draw of 2.79 million barrels in the week to September 6, against expectations for an increase of 0.7 mb.
The API data showed declines in gasoline inventories, suggesting that demand in the world’s biggest fuel consumer remained strong even as the travel-heavy summer season came to an end.
The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday.
Oil near 3-year low amid demand fears
But despite the positive signals, oil prices tumbled to their lowest levels since December 2021 on Tuesday, hit chiefly by concerns over slowing global demand.
The selldown was initially sparked by data from China which showed oil imports to the country shrank for a third consecutive month in August, amid slowing growth and waning fuel demand in the world’s biggest oil importer.
Fears of a demand slowdown were exacerbated by the OPEC slashing its demand growth forecast for the year. The cartel now sees 2024 global oil demand growth at 2.03 million barrels per day, compared to prior forecasts of 2.11 million bpd.
Ambar Warrick contributed to this report.
