Oil Market Jitters as Storm Looms

17 Sep 2024 , 09:40 AM

Oil prices increased on Monday as Hurricane Francine’s lingering impact on output in the United States Gulf of Mexico countered persistent Chinese demand concerns ahead of the Federal Reserve’s interest rate drop decision this week.

Brent crude futures for November finished at $72.75 a barrel, up $1.14 or 1.59%. U.S. crude futures for October finished at $70.09, up $1.44 or 2.1%.

More than 12% of crude production and 16% of natural gas output in the Gulf of Mexico remained offline during Hurricane Francine, according to the US Bureau of Safety and Environmental Enforcement (BSEE) on Monday.

Overall, the market was cautious ahead of the Federal Reserve’s interest rate decision on Wednesday.

Traders are increasingly betting on a Fed rate drop of 50 basis points (bps) rather than 25 bps, according to the CME FedWatch tool, which tracks Fed fund futures.

Lower interest rates often lower the cost of borrowing, boosting economic activity and increasing demand for oil.

China, the world’s largest oil importer, saw industrial output growth fall to a five-month low in August, while retail sales and new home prices fell even more.

China’s oil refinery output decreased for the sixth consecutive month, as sluggish fuel demand and export margins hampered production.

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