Oil closes higher, with recession and hurricane fears on the radar

Oil futures closed higher on Tuesday (27), as risk assets, such as the commodity, try to recover from recent robust losses, amid recession fears. In addition, the market monitors the interruption of oil production in the Gulf of Mexico, as a safety measure against Hurricane Ian.

WTI crude for November closed up 2.33% ($1.79) at $78.50 a barrel on the New York Mercantile Exchange (Nymex), and Brent for December rose 2.43 % (US$2.01), at US$84.87 a barrel, on the Intercontinental Exchange (ICE).

According to the US Bureau of Safety and Environmental Enforcement, about 11% of offshore oil production in the Gulf of Mexico, equivalent to about 190,000 barrels a day, was halted when oil companies closed facilities for safety before the Hurricane Ian, says the government. The body says about 8.6% of offshore natural gas production has also been halted.

According to Edward Moya of Oanda, oil prices are trying to stabilize alongside riskier assets as the fear-driven global recession is slowly being priced in.

“The supply side will keep this oil market tight as OPEC+ is likely to start reducing production, global inventories are low and long-term support will come from a lack of investment in new wells.” “Oil forecasts for much higher prices are being cut, as no one anticipated this latest dollar movement”, he ponders.

Natural gas prices in Europe soared on Tuesday after the detection of leaks in pipes of the Nord Stream pipeline used to transport the commodity from Russia to Germany. This morning, so-called Dutch gas TTF futures jumped more than 8% to €208.44 per megawatt hour.

Julius Baer believes US inflation trends and European energy risks are overestimated. “So we see economies going through a period of pronounced stagnation rather than going into recession. Commodities go through a phase of extreme shocks, suggesting a temporary and not lasting recovery in prices,” he highlighted.

*With information from Dow Jones Newswires