Oil rallies on tight supplies in aftermath of US storm

Oil prices rose on Tuesday, after sharp losses the previous session, amid tighter US supplies, ending days of losses as global markets remain haunted by the potential impact on China’s economy of a crisis at heavily indebted property group China Evergrande.

Brent crude gained $0.7, or 1%, to $74.62 a barrel by 1239 GMT, having fallen by almost 2% on Monday.

The October West Texas Intermediate (WTI) contract, which expires later on Tuesday, was up $0.61, or 0.9%, at $70.90, after dropping 2.3% in the previous session. The more active November contract gained $0.72 a barrel to $70.86.

Growing concerns over US production “seem to be outpacing other factors ... such as the uncertainty over the outcome of the Federal Reserve monetary policy committee meeting and fears that the Evergrande issue may trigger a wider crisis,” ActivTrades analyst Ricardo Evangelista said.

Royal Dutch Shell, the largest US Gulf of Mexico oil producer, said on Monday that damage to offshore transfer facilities from Hurricane Ida would cut production into early next year.

About 18% of the US Gulf’s oil and 27% of its natural gas production remained offline on Monday, more than three weeks after Hurricane Ida, regulator Bureau of Safety and Environmental Enforcement (BSEE) said.

Still, investors across financial assets have been rocked by the fallout from heavily indebted Evergrande and the threat of a wider market shakeout in the longer term.

While that view of the state of China’s economy is weighing on markets, the US Federal Reserve is also expected to start tightening monetary policy – likely to make investors warier of riskier assets such as oil.