Oil prices rebounded from a near three-year low in Asian trading on Wednesday, as traders awaited the impact of Hurricane Francine on production in the Gulf of Mexico. The market also found support from unexpected data showing a weekly draw in U.S. oil inventories.

However, the recovery followed steep losses on Tuesday, driven by disappointing Chinese import data and a reduced demand forecast from the Organization of Petroleum Exporting Countries (OPEC), which clouded the outlook for oil markets.

November Brent crude futures rose 0.5% to $69.51 per barrel, while West Texas Intermediate (WTI) crude futures increased 0.6% to $65.50 per barrel by 20:34 ET (00:34 GMT).

Hurricane Francine Impacts Gulf of Mexico Production

Francine strengthened into a Category 1 hurricane on Tuesday evening, with landfall expected in Louisiana on Wednesday. The storm’s trajectory is set to cause significant damage across the American mid-South over the coming days. In anticipation, numerous oil and gas producers have halted production in the Gulf of Mexico, a region responsible for about 15% of U.S. oil output. Any disruptions are expected to tighten supplies in the short term.

U.S. Inventories See Unexpected Draw – API

The American Petroleum Institute (API) reported an unexpected draw in U.S. oil inventories, which fell by 2.79 million barrels in the week ending September 6. This contrasted with expectations for an increase of 0.7 million barrels. Additionally, gasoline inventories declined, suggesting that demand in the U.S., the world’s largest fuel consumer, remained robust even as the summer travel season ended. Official inventory data, expected later on Wednesday, typically aligns with API figures.

Oil Prices Hit by Demand Fears

Despite these positive signals, oil prices plunged to their lowest levels since December 2021 on Tuesday, largely due to concerns about slowing global demand. The sell-off was triggered by data from China, which showed a third consecutive monthly decline in oil imports in August, reflecting slowing economic growth and weakening fuel demand in the world’s largest oil importer.

Fears of weakening demand were further exacerbated by OPEC cutting its global oil demand growth forecast for 2024 to 2.03 million barrels per day, down from an earlier projection of 2.11 million barrels per day.

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