Oil Prices Rise Amid Gulf Disruptions and Dollar Weakness

Oil prices increased on Monday due to ongoing disruptions in U.S. Gulf production and a weaker dollar ahead of an anticipated interest rate cut by the Federal Reserve later this week.

As of 08:05 ET (12:05 GMT), Brent oil futures were up 0.7% at $72.11 a barrel, while West Texas Intermediate crude futures rose 0.8% to $68.30 a barrel.

Rate Cuts in Focus as Fed Meeting Looms

A softer dollar provided significant support for oil prices as markets geared up for a potential interest rate cut from the Fed on Wednesday. The central bank is expected to initiate an easing cycle, though opinions are divided over whether the cut will be 25 or 50 basis points. Lower interest rates are generally favorable for economic growth, which could help sustain U.S. fuel demand in the upcoming months.

Continued Disruption in Gulf of Mexico

Additional support came from ongoing production disruptions in the Gulf of Mexico caused by Hurricane Francine. According to the U.S. offshore energy regulator, nearly 20% of crude oil production and 28% of natural gas output in the Gulf of Mexico remain offline following the hurricane's impact on Louisiana and its effects on four southern states.

Chinese Economic Data Underwhelms

Gains were tempered by worries over slowing demand, especially after disappointing economic data from China, which included lower-than-expected industrial production and retail sales, rising unemployment, and falling house prices. Analysts at ANZ warned that this slowing growth could reduce China's appetite for crude oil, prompting expectations of additional stimulus measures from Beijing to support local economic growth, though GDP growth is still projected to fall below the 5% target in Q3.

Concerns over China's economic outlook have led both the Organization of the Petroleum Exporting Countries and the International Energy Agency to lower their oil demand growth forecasts for the year. Additionally, holidays in China and Japan have kept trading volumes relatively low.

(Ambar Warrick contributed to this article.)