Oil prices experienced a modest increase during on Tuesday, buoyed by the potential for interest rate cuts and ongoing supply disruptions linked to Hurricane Francine. However, gains were tempered by worries about declining demand, particularly from China, the world’s largest oil importer, following a series of disappointing economic reports over the weekend.
Brent crude futures set to expire in November climbed 0.2 percent to $72.88 per barrel, while West Texas Intermediate (WTI) crude futures rose 0.3 percent to $69.24 per barrel by 21:07 ET (01:07 GMT).
Ongoing supply disruptions from Hurricane Francine
U.S. officials reported that over 12 percent of crude oil production and 16 percent of natural gas output in the Gulf of Mexico remained offline due to Hurricane Francine’s impact. Prolonged production disruptions in the U.S. signal tighter supplies, potentially providing some upward momentum for crude prices. Nonetheless, oil producers in the affected region have been working diligently to restore production as Francine weakened after landfall.
Fed meeting and interest rate cuts
This week, all eyes are on the Federal Reserve’s meeting conclusion on Wednesday, where a reduction in interest rates is widely anticipated. Expectations for a more substantial cut of 50 basis points have increased in recent sessions, with the Fed expected to initiate an easing cycle starting Wednesday. This speculation has placed downward pressure on the dollar, benefiting oil prices. The likelihood of lower interest rates also suggests a more optimistic outlook for oil demand, as reduced rates tend to stimulate economic growth.
Read more: Oil prices rise on U.S. rate cut hopes despite weak demand, Chinese data
Demand concerns weigh on oil prices
Despite these factors, further increases in oil prices faced headwinds from ongoing concerns about slowing demand, especially in China. Prices have also been recovering from a sharp decline to near three-year lows last week, prompted by fears about China’s economic health, which led both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to revise their demand forecasts downward.
A series of weak economic indicators released over the weekend heightened concerns about slowing growth in China, particularly as the nation confronts deflation. Additionally, worries about a potential resurgence in trade tensions between China and the West have further dampened sentiment regarding the country.
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