Oil prices saw a slight increase in early trading on Monday, driven by expectations of a U.S. interest rate cut this week. However, gains were limited by disappointing economic data from China and ongoing concerns about demand.
Brent crude futures for November rose by 3 cents to $71.64 a barrel at 04:02 GMT, while U.S. crude futures for October increased by 16 cents, or 0.2 percent, to $68.81 a barrel.
Supply concerns easing
Both contracts closed lower in the previous session, as worries about supply disruptions eased with the resumption of Gulf of Mexico crude production following Hurricane Francine. Additionally, recent data indicated a weekly uptick in the U.S. rig count.
Despite this, nearly 20 percent of crude oil production and 28 percent of natural gas output in the Gulf of Mexico remain offline in the aftermath of the hurricane.
Focus on U.S. Fed’s meeting
This week, a significant focus will be on the Federal Open Market Committee’s (FOMC) decision regarding the extent of a rate cut following its meeting on September 17-18. Fed fund futures suggest that investors are increasingly anticipating a 50 basis point cut rather than a 25 basis point reduction, according to CME FedWatch.
Lower interest rates are expected to decrease borrowing costs, potentially stimulating economic activity and increasing demand.
China’s economic slowdown
In China, the largest oil importer, industrial output growth slowed to a five-month low in August, with further declines in retail sales and new home prices. Oil refinery production also dropped for the fifth consecutive month, hampered by weak fuel demand and low export margins.
Stability of the U.S. dollar
Meanwhile, the U.S. dollar remained stable following reports that Republican presidential candidate Donald Trump was declared safe after what the FBI described as a second assassination attempt near his golf course in Florida.
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