(Bloomberg) -- Oil accelerated gains in the wake of a weakening dollar and as Tropical Storm Zeta leads U.S. Gulf crude producers to shut output.Futures rose as much as 2.8% in New York following Monday’s slide below $39 a barrel. The Bloomberg Dollar Spot Index declined as much as 0.3%, boosting the appeal of commodities priced in the U.S. currency. Meanwhile, Zeta has already taken 16% of U.S. Gulf output offline, with Royal Dutch Shell Plc and Enbridge Inc. among operators shutting in production and evacuating platforms. The storm is expected to regain hurricane strength as it heads toward Louisiana.“There’s a little bit of production shut in that’s expected from Zeta, but realistically, we’re dead-cat bouncing off yesterday’s decline and holding onto what we can,” said Gary Cunningham, director of account management and research at Tradition Energy.Prices are testing the lower end of their recent trading range as Libya continues to ramp up output. Oil production at Libya’s El Feel field is said to have climbed to 75,000 barrels a day, after a force majeure was lifted on Monday. Despite an improvement in consumption in Asia, a renewed surge in virus cases across the U.S. and Europe is raising concerns the fragile recovery in demand will be derailed.“Now that we’re seeing lockdowns starting to happen in Europe, the demand for jet fuel is just going to continue to fall going into the winter season,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC. “With Libya output coming back, that’s adding more oil to the market that’s not needed.”Though front-month futures prices were higher on Tuesday, the market’s underlying structure has softened. Brent’s nearest timespread has weakened nearly 10 cents over the last two sessions, pointing to growing concerns about oversupply as Libyan oil returns.Crude volatility has also jumped, highlighting trader angst. There may be more volatility ahead for global benchmark Brent futures, as December options expire on Tuesday with the biggest volume expiries for Brent this year. Put options that would profit a buyer if Brent drops below $40 have nearly 21,600 lots in open interest.“It’s very difficult to predict what is going to happen with oil and gas right now,” Murray Auchincloss, chief financial officer of BP Plc, said in an interview following the company’s earnings report. “We’ve seen continuous reduction in inventory levels since June, and when those move toward the five-year average I suspect there will be an uptick in price.”Meanwhile, U.S. crude inventories are expected to rise, while distillate stockpiles will decline, according to a Bloomberg survey before government inventory data on Wednesday. The industry-funded American Petroleum Institute will release its figures later Tuesday.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.