MARKET NEWS

By Yongchang Chin

(Bloomberg) -- Oil headed for its first weekly gain in a month after storm Francine disrupted crude production, and a risk-on tone swept across wider markets, helping to ease a previously oversold crude market.

Brent crude rose above $72 a barrel, advancing for a third session. Much of crude’s recovery rally has been driven by covering of extreme bearish positioning after prices dipped below $70 earlier in the week.

Storm Francine — which weakened from its previous hurricane force — had spurred a sizable shut-in of production in the Gulf of Mexico. In broader markets, equities rallied as the dollar declined, a boost for commodities including crude, while supply disruptions in Libya continue.

Crude remains 16% lower this quarter on concerns about a dimming demand outlook, particularly in top importer China. The International Energy Agency said that global consumption growth in the first half was the lowest since the pandemic as China’s economy cooled, according to its monthly report. Against that backdrop, producer cartel OPEC+ has opted to defer a plan to relax supply curbs.

“The market is not without upside potential, given recent strife in Libya and a series of geopolitical distortions in recent years,” Macquarie analysts including Marcus Garvey and Vikas Dwivedi said in a note. “We forecast a heavy surplus, as non-OPEC supply growth and sluggish demand will limit the market’s need for OPEC+ to return barrels as planned.”

The US Federal Reserve is widely expected to start cutting US interest rates at its meeting next week after signs of a labor market slowdown emerged, and there’s speculation that policymakers may opt for a 50-basis-point reduction. Lower borrowing costs may support growth and wider energy demand.