Brent crude oil futures November crude prices rose 36 cents, or 0.5 percent, to $73.11 a barrel by 0635 GMT. US crude oil futures In October, oil rose 53 cents, or 0.8%, to $70.62 a barrel.
Both contracts closed higher in the previous session as the impact of Hurricane Francine on production in the US Gulf of Mexico offset concerns about Chinese demand ahead of the US Federal Reserve’s decision to cut interest rates this week, which should prove positive for investor sentiment on oil.
More than 12% of crude oil production and 16% of natural gas production in the U.S. Gulf of Mexico remained offline, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) said Monday.
“Oil prices managed to recover slightly… (An) extreme bearish mood over the past few weeks called for some stabilisation in the near term, with prices previously touching their lowest level since 2021,” said Yeap Jun Rong, market strategist at IG.
“But a weaker-than-expected run of Chinese economic data of late could be a source of caution, while the run-up to the FOMC’s next interest rate decision may limit risk-taking,” Yeap added, referring to the Federal Open Market Committee. The Fed is expected to begin its easing cycle on Wednesday, with federal funds futures showing markets are now pricing in a 69% chance of the central bank cutting rates by 50 basis points. “Rising expectations of an aggressive rate cut boosted sentiment across the commodity complex,” ANZ analysts said in a note, adding that supply disruptions also supported oil markets.
A lower interest rate will reduce the cost of borrowing and can potentially increase demand for oil by supporting economic growth.
Investors also expect a drop in U.S. crude inventories, which likely fell by around 200,000 barrels in the week ended Sept. 13, according to a Reuters poll.
However, weaker-than-expected demand growth in China, the world’s largest crude importer, has limited price gains. Output at China’s oil refineries fell for a fifth month in August amid weaker fuel demand and weak export margins, government data showed on Saturday.
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