Oil Climbs as Traders Eye Price Floor Despite US Stockpile Gain

(Bloomberg) — Oil advanced from a four-month low as traders tried to establish a price floor after several days of declines.

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West Texas Intermediate rose to settle near $74 per barrel after five straight sessions of losses. The market had entered oversold territory as a result of OPEC+’s plan to boost supply in October. Prices edged lower earlier in the session after the US Energy Information Administration reported that US crude stockpiles expanded by 1.23 million barrels.

“It remains to be seen whether this recovery will last, given ongoing concerns over demand and the OPEC+ decision to eventually phase out the voluntary output cuts,” Fawad Razaqzada, a market analyst at City Index and Forex.com, wrote in a note Wednesday. “However, these concerns might be priced in by now, which should mean that prices could find some much-needed support.”

Oil has tumbled almost 4% this week following a decision by OPEC+ on Sunday to start unwinding supply cuts in the fourth quarter, despite concerns about demand and higher output from outside of the group. Traders who rely on trend-following algorithms compounded the selloff.

While the Organization of the Petroleum Exporting Countries and its allies may have spooked the market with their decision, RBC Capital Markets LLC predicts the Saudi-led group will “hit the kill switch” on returning supply if weakness persists. Most analysts had expected OPEC+ to extend the curbs through year-end.

The group is already hinting at concern about consumption. Saudi Aramco, the largest producer in OPEC+, lowered prices for oil delivered to Asia amid doubt about the strength of demand.

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