Oil prices rose on Monday as the ongoing impact of Hurricane Francine on output in the U.S. Gulf of Mexico offset persistent Chinese demand concerns ahead of this week’s U.S. Federal Reserve interest rate cut decision. Brent crude futures for November settled at $72.75 a barrel, up $1.14, or 1.59%, while U.S. crude futures for October settled at $70.09, up $1.44, or 2.1%.
The remnants of Hurricane Francine continued to affect oil production in the U.S. Gulf of Mexico, with over 12% of crude production and 16% of natural gas output remaining offline, according to the U.S. Bureau of Safety and Environmental Enforcement. This led to a slightly bullish outlook, as the impact was more significant on the production side than on refining.
However, the market remained cautious ahead of the Federal Reserve’s interest rate decision on Wednesday. Traders are increasingly betting on a Fed rate cut of 50 basis points rather than 25 bps, which could boost economic activity and lift demand for oil. A quarter-percent Fed rate cut could heighten concerns about the pace of oil demand growth, while a more aggressive rate cut could lead to conflicting trends in the market.
Weaker Chinese economic data over the weekend dampened market sentiment, with the low-for-longer growth outlook in the world’s second-largest economy reinforcing doubts over oil demand. Industrial output growth in China slowed to a five-month low in August, while retail sales and new home prices weakened further. China’s oil refinery output also fell for a fifth month due to weak fuel demand and export margins.
Despite these concerns, Brent and WTI each gained about 1% last week but remain comfortably below their August averages. The price slide around the start of this month was driven in part by demand concerns, but the impact of Hurricane Francine has provided a temporary boost to oil prices.
