Traders watch output in the aftermath of Hurricane Francine and the expectation of lower US crude stockpiles
17 September 2024 - 07:45
byJeslyn Lerh
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Singapore — Oil prices extended gains on Tuesday as the market eyed US output concerns in the aftermath of Hurricane Francine and expectations of lower US crude stockpiles.
Brent crude futures for November rose 34c, or 0.5%, at $73.09 a barrel at 4.20am GMT. US crude futures for October climbed 49c, or 0.7%, at $70.58 a barrel.
Both contracts settled higher in the previous session as the ongoing impact of Hurricane Francine on output in the US Gulf of Mexico countered Chinese demand concerns ahead of this week’s US Federal Reserve interest rate cut decision, which should prove positive for investor sentiment in oil.
More than 12% of crude production and 16% of natural gas output in the US Gulf of Mexico remained offline, according to the US Bureau of Safety and Environmental Enforcement on Monday.
“Oil prices managed to recover slightly.... [An] extreme bearish state over the past weeks called for some near-term stabilisation, with prices previously touching their lowest level since 2021,” said Yeap Jun Rong, market strategist at IG.
“But a weaker-than-expected run in China's economic data lately could still be a source of caution, while the lead-up to the upcoming FOMC [Federal open market committee] interest rate decision may limit some risk-taking,” Yeap said.
The Fed is expected to start its easing cycle on Wednesday, with Fed funds futures showing markets are now pricing in a 69% chance the central bank will cut rates by 50 basis points (bps).
“Growing expectations of an aggressive rate cut boosted sentiment across the commodities complex,” ANZ analysts said in a note, adding that supply disruptions also supported oil markets.
A lower interest rate will reduce the cost of borrowing and can potentially lift oil demand by supporting economic growth.
Investors also eyed an expected drop in US crude inventories, which likely fell by about 200,000 barrels in the week to September 13, based on a Reuters poll.
Still, lower-than-expected demand growth in China, the world’s largest crude importer, have capped price gains. China's oil refinery output fell for a fifth month in August amid declining fuel demand and weak export margins, government data showed on Saturday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil gains ground amid worry about US output
Traders watch output in the aftermath of Hurricane Francine and the expectation of lower US crude stockpiles
Singapore — Oil prices extended gains on Tuesday as the market eyed US output concerns in the aftermath of Hurricane Francine and expectations of lower US crude stockpiles.
Brent crude futures for November rose 34c, or 0.5%, at $73.09 a barrel at 4.20am GMT. US crude futures for October climbed 49c, or 0.7%, at $70.58 a barrel.
Both contracts settled higher in the previous session as the ongoing impact of Hurricane Francine on output in the US Gulf of Mexico countered Chinese demand concerns ahead of this week’s US Federal Reserve interest rate cut decision, which should prove positive for investor sentiment in oil.
More than 12% of crude production and 16% of natural gas output in the US Gulf of Mexico remained offline, according to the US Bureau of Safety and Environmental Enforcement on Monday.
“Oil prices managed to recover slightly.... [An] extreme bearish state over the past weeks called for some near-term stabilisation, with prices previously touching their lowest level since 2021,” said Yeap Jun Rong, market strategist at IG.
“But a weaker-than-expected run in China's economic data lately could still be a source of caution, while the lead-up to the upcoming FOMC [Federal open market committee] interest rate decision may limit some risk-taking,” Yeap said.
The Fed is expected to start its easing cycle on Wednesday, with Fed funds futures showing markets are now pricing in a 69% chance the central bank will cut rates by 50 basis points (bps).
“Growing expectations of an aggressive rate cut boosted sentiment across the commodities complex,” ANZ analysts said in a note, adding that supply disruptions also supported oil markets.
A lower interest rate will reduce the cost of borrowing and can potentially lift oil demand by supporting economic growth.
Investors also eyed an expected drop in US crude inventories, which likely fell by about 200,000 barrels in the week to September 13, based on a Reuters poll.
Still, lower-than-expected demand growth in China, the world’s largest crude importer, have capped price gains. China's oil refinery output fell for a fifth month in August amid declining fuel demand and weak export margins, government data showed on Saturday.
Reuters
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