Oil Prices Slightly Rise Amid Interest Rate Cut Prospects

Oil prices saw a slight increase on Tuesday, buoyed by hopes of interest rate cuts and supply disruptions following Hurricane Francine.

At 08:10 ET (12:10 GMT), Brent oil futures were up 0.2% to $72.88 a barrel, while West Texas Intermediate (WTI) crude futures increased by 0.3% to $69.24 a barrel.

Supply Disruptions from Hurricane Francine

U.S. officials reported that more than 12% of crude production and 16% of natural gas output in the Gulf of Mexico remained offline after Hurricane Francine. Extended production disruptions may tighten supplies in the U.S., potentially boosting crude prices. However, oil producers in the region have begun efforts to resume production, suggesting the impact may be short-lived.

Fed Meeting and Interest Rate Cuts

This week, attention is on the Federal Reserve’s meeting concluding Wednesday, where a rate cut is widely anticipated. Speculation around a larger, 50 basis point cut has increased recently, with the Fed expected to start an easing cycle. This prospect has weakened the dollar, benefitting oil prices, as lower rates could enhance oil demand through fostering economic growth.

Demand Fears Limit Oil’s Upside

However, growing concerns over a slowdown in demand, particularly from China, have constrained further gains in oil prices. Recent falls in oil prices, nearing three-year lows, were driven by worries regarding China, leading both OPEC and the International Energy Agency to revise their demand outlooks downward. Weak economic data from China over the weekend raised fears of declining growth, especially as the country faces deflation. Additionally, Chinese oil refinery output dropped for a fifth consecutive month in August due to reduced fuel demand and poor export margins. Worries over a potential renewed trade war between China and the West have also weighed on sentiment.

(Ambar Warrick contributed to this article.)