Oil prices extended gains on Tuesday as the market focused on U.S. production concerns and expectations of falling U.S. crude inventories in the wake of Hurricane Francine.
November Brent crude futures were up 36 cents, or 0.5%, at $73.11 a barrel by 0635 GMT. WTI crude futures were up 53 cents, or 0.8%, at $70.62 a barrel.
Both contracts rose in the previous session as Hurricane Francine’s impact on U.S. Gulf production offset concerns about Chinese demand ahead of the U.S. Federal Reserve’s decision to cut interest rates this week, a positive outlook for investors’ confidence in oil.
According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE), more than 12% of crude oil and 16% of natural gas production in the U.S. Gulf region have remained offline.
Oil prices have recovered slightly. The extreme downtrend in recent weeks, with prices previously reaching their lowest level since 2021, calls for some stability in the near term.
However, a recent weaker-than-expected recovery in Chinese economic data could limit some risk-taking in the run-up to the upcoming FOMC interest rate decision.
The Fed is expected to begin its easing cycle on Wednesday, with Fed funds futures showing markets pricing in a 69% chance that the central bank will cut interest rates by 50 basis points.
Rising expectations of an aggressive rate cut have boosted sentiment in the commodity complex, while supply disruptions have supported oil markets.
A lower interest rate would lower borrowing costs and boost oil demand, supporting economic growth.
Investors are also eyeing an expected decline in U.S. crude inventories, which surveys show likely fell by about 200,000 barrels in the week ending Sept. 13.
Still, weaker-than-expected demand growth in China, the world’s largest crude importer, has limited price gains. Government data showed Saturday that China’s oil refinery output fell for a fifth month in August, amid slumping fuel demand and weak export margins.
