Oil Prices Rise Amid U.S. Gulf Disruption

Oil prices increased on Monday due to ongoing disruptions in U.S. Gulf oil production and a weaker dollar, with expectations of an 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,
– West Texas Intermediate crude futures rose 0.8% to $68.30 a barrel.

Rate Cuts in Focus as Fed Meeting Looms

A softer dollar significantly supported oil prices as markets anticipated an interest rate cut from the Fed on Wednesday. The central bank is expected to begin an easing cycle, with traders divided over the extent of the rate cut, either 25 or 50 basis points. Lower rates generally favor economic growth, which can help sustain U.S. fuel demand in the upcoming months.

Continued Disruption in Gulf of Mexico

The tone in the market was also bolstered by ongoing disruptions in Gulf oil production following Hurricane Francine’s impact. The U.S. offshore energy regulator reported that nearly 20% of crude production and 28% of natural gas output in the Gulf is still offline after Francine made landfall in Louisiana as a Category 2 hurricane, subsequently causing power outages in four southern states.

Chinese Economic Data Underwhelms

However, gains were limited due to concerns over dwindling demand, particularly after disappointing economic data from China over the weekend. Both industrial production and retail sales fell short of expectations, with rising unemployment and falling house prices fueling worries that slowing growth in the world’s largest oil importer may reduce its crude purchases.
Analysts at ANZ suggest that Beijing is likely to introduce more stimulus measures to boost local economic performance, although growth is still expected to fall below the 5% target in the third quarter. Consequently, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) downgraded their projections for oil demand growth this year. Additionally, holidays in China and Japan contributed to lower trading volumes.

*(Ambar Warrick contributed to this article.)