Oil Surges Amid Fed Rate Cut Expectations

16 Sep 2024 , 10:00 AM

Oil prices rose in early trade on Monday, boosted by prospects of a US interest rate cut this week, but gains were limited by U.S. production resumption following Hurricane Francine and lower Chinese data.

Brent crude futures for November rose 15 cents, or 0.2%, to $71.76 a barrel. U.S. oil futures for October were up 23 cents, or 0.3%, to $68.88 per barrel.

Both contracts had finished lower the previous session, with concerns about supply interruptions alleviated when Gulf of Mexico crude production began following Hurricane Francine and increasing data indicated a weekly increase in the U.S. rig count.

Nonetheless, roughly a fifth of crude oil production and 28% of natural gas output in the Gulf of Mexico remain halted in the aftermath of the hurricane.

A crucial element that will dominate the market this week is how aggressively the US Federal Reserve will decrease interest rates following its meeting on September 17 and 18. Fed fund futures show investors are increasingly wagering the central bank would cut by 50 basis points rather than 25 basis points, according to CME FedWatch.

Lower interest rates reduce the cost of borrowing, which can stimulate economic activity and increase demand for oil.

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