Oil climbs as hurricane shuts U.S. output, bouncing back from 5% slide overnight

By Sonali Paul
MELBOURNE, Oct 29 (Reuters) - Oil prices rose in early
trading on Thursday, regaining some of the ground lost in a 5%
slump overnight, amid the prospect of tighter short-term supply
with two-thirds of U.S. output shut in the Gulf of Mexico as
Hurricane Zeta slammed Louisiana.
U.S. West Texas Intermediate (WTI) crude CLc1 futures rose
29 cents, or 0.8%, to $37.68 a barrel at 0120 GMT, while Brent
crude LCOc1 futures rose 25 cents, or 0.6%, to $39.37 a
barrel.
Signs of a growing global supply glut and a second wave in
the coronavirus pandemic sent prices tumbling in the previous
session, but market watchers said technical support levels were
a factor in trading on Thursday.
"The increase in volatility is attractive to traders. That
proximity to the $37 support is one of the factors at play
today," said Michael McCarthy, chief market strategist at CMC
Markets and Stockbroking.
WTI in the $36.45 to $36.95 range has proven to be a "buy
zone" since the beginning of September, Axi chief market
strategist Stephen Innes said. If the market fell through that,
it would be a bearish sign, he said.
Hurricane Zeta's impact is expected to be short-lived and
the return of U.S. production will add to oil oversupply, as
Libya rapidly ramps up output after an eight-month blockade and
soaring COVID-19 cases in the United States and Europe lead to
new restrictions keeping people off the roads.
Data from the U.S. Energy Information Administration on
Wednesday provided evidence of the growing glut: U.S. crude
stockpiles rose by 4.3 million barrels in the week to Oct. 23, a
much bigger increase than expected. "It's been blow after blow for the outlook for crude.
Whether it's on the supply side with Libya coming back on line,
or lack of discipline in OPEC+, or new lockdowns in Germany and
France as we speak, they all further sour the outlook," said
strategist McCarthy.
France will require people to stay home for all but
essential activities as of Friday, while Germany will shut bars,
restaurants and theatres from Nov. 2 through the end of the
month to stop the spread of the coronavirus. "The pandemic's resurgence is putting pressure on OPEC to
delay its planned production hike in January," ANZ Research said
in a note.
The Organization of the Petroleum Exporting Countries and
allies, together called OPEC+, plan on tapering their production
cuts in January 2021 from a current 7.7 million barrels per day
(bpd) to around 5.7 million bpd.