Oil attempted to mount a recovery from its plunge to the lowest level in more than two years, with traders weighing intensifying concerns about looming oversupply.

The benchmark has sunk by almost a fifth this quarter on concerns that slowing growth in the US and China, the leading consumers, will hurt consumption at a time of robust and expanding supplies. It moved higher on Wednesday to trade above $70 a barrel - even after US data showed higher-than-expected core inflation.

Market metrics - including the shape of the futures curve - indicate that conditions are quickly becoming far less tight, with pockets further out having a brief foray into a bearish contango structure. 

Brent gained ground on Wednesday after the American Petroleum Institute estimated US commercial stockpiles fell by about 2.8 million barrels last week, according to people familiar with the figures. Official data are due later on Wednesday.

Oil’s retreat has already seen OPEC+ postpone an output hike, stoking investor concerns that the extra barrels could be still be brought to the market closer to 2025. The International Energy Agency - which will issue a revised monthly outlook later this week - said in August the market risked higher inventories next year even if the cartel canceled the output increase.

“We’ve got closer to what looks like a high-conviction surplus for next year,” Citigroup Inc. head of commodities research Max Layton said in a Bloomberg TV interview. “The market has just simply got closer to D-Day really.”

The slump will be a tailwind for central bankers as they press home their fight against inflation, with the Federal Reserve expected to start reducing interest rates next week, given easing price pressures and signs of a softening labor market. It will also be a boon for nations that rely on crude imports to power their economies, such as China and Japan.

On the technical side, Brent’s tumble on Tuesday pushed its 14-day Relative Strength Index - a measure of the speed and magnitude of an asset’s move - briefly below 30, a level seen by some traders as potentially signaling a near-term rebound.

Traders are also tracking Hurricane Francine, which is expected to make landfall in Louisiana later Wednesday. With Chevron Corp. and Shell Plc among companies taking measures, federal officials said the total amount of shut-in oil represented nearly a quarter of crude production in the Gulf of Mexico. In addition, eight refineries may lie in the system’s path.

  - Bloomberg