By Jeslyn Lerh
SINGAPORE (Reuters) – Oil prices continued to rise on Tuesday as the market kept a close eye on U.S. output concerns following Hurricane Francine and anticipated lower stockpiles.
Crude futures for November increased by 16 cents, or 0.2%, reaching $72.91 a barrel at 0120 GMT. Meanwhile, U.S. crude futures for October saw a 34-cent climb, or 0.5%, hitting $70.43 a barrel.
Both contracts closed higher in the previous session as the ongoing impact of Hurricane Francine on U.S. Gulf of Mexico output outweighed worries about Chinese demand ahead of the upcoming U.S. Federal Reserve interest rate decision, which is expected to boost investor confidence in oil.
According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE) on Monday, more than 12% of crude production and 16% of natural gas output in the U.S. Gulf of Mexico were offline.
The market is eagerly awaiting the Federal Reserve’s interest rate decision. A lower interest rate could reduce borrowing costs and potentially increase oil demand by supporting economic growth.
“Growing expectations of an aggressive rate cut have lifted sentiment in the commodities sector,” noted ANZ analysts in a report, highlighting that ongoing supply disruptions have also bolstered oil markets.
Investors are also anticipating a decrease in U.S. crude inventories, which are expected to have dropped by approximately 200,000 barrels in the week ending Sept. 13, according to a Reuters poll.
However, concerns about lower-than-expected demand growth in China, the world’s largest crude importer, have capped price gains. Government data revealed that China’s oil refinery output declined for the fifth consecutive month in August due to weakening fuel demand and poor export margins.
Analysis:
Oil prices are on the rise due to U.S. output concerns following Hurricane Francine and expectations of lower stockpiles. The ongoing impact of the hurricane on Gulf of Mexico output, along with anticipation of a Federal Reserve interest rate cut, are driving investor sentiment in the oil market. Supply disruptions and a potential drop in U.S. crude inventories are further supporting oil prices. However, concerns about weak demand growth in China are limiting price gains. Investors should monitor these factors closely as they can impact oil prices and potentially their financial decisions.