Oil traded above $74 a barrel on concerns Hurricane Michael in the U.S. may exacerbate a supply crunch, while the International Energy Agency warned higher prices may put the world economy at risk.
Futures were little changed in New York after gaining 0.9 percent on Tuesday. OPEC and other key producers need to boost output as the oil market is entering a “red zone,” and high prices are inflicting damage on the global economy, IEA Executive Director Fatih Birol said in an interview. Adding to supply risks is Hurricane Michael, which curtailed oil production in the Gulf of Mexico by 40 percent as it heads to Florida.
“The oil market remains overly bullish on the dwindling spare capacity argument,” said Stephen Innes, Singapore-based head of Asia Pacific trading at Oanda Corp. Still, the IEA’s comment suggests “prices are peaking at the most opportunistic time given the waning global growth narrative.”
Crude has climbed more than 15 percent since mid-August as uncertainties remain on whether the Organization of Petroleum Exporting Countries can replace shrinking supplies from Venezuela to Iran. The rally has prompted President Donald Trump to continue his attack against the group for letting prices surge, while Russia says the U.S. sanctions on the Persian Gulf state is to blame for the gains.
West Texas Intermediate for November delivery was at $74.77 a barrel on the New York Mercantile Exchange at 9:37 a.m. in Seoul, down 19 cents. The contract rose 67 cents to $74.96 a barrel on Tuesday. Total volume traded was about 48 percent below the 100-day average.
Brent for December settlement was 5 cents lower at $84.95 on the London-based ICE Futures Europe exchange. The contract climbed 1.3 percent to $85 on Tuesday. The global benchmark crude traded at a $10.30 premium to WTI for the same month.
