Oil prices rise on US rate cut expectations

Oil prices rose in Asian trade on Monday, driven by expectations of a US interest rate cut this week. However, gains were tempered by ongoing concerns about demand, particularly in China, and the impact of weaker economic data.

Brent crude futures for November increased by 0.5 per cent to $71.99 a barrel, while US crude futures for October rose by 0.7 per cent to $69.14 a barrel.

Both contracts had declined in the previous session due to easing supply disruption concerns and a rise in the US rig count.

Despite the recovery in Gulf of Mexico crude production following Hurricane Francine, nearly a fifth of crude oil production and 28 per cent of natural gas output remain offline.

The Federal Open Market Committee (FOMC) is scheduled to announce its interest rate decision on September 17-18. Investors are increasingly betting on a 50-basis-point rate cut instead of a 25-basis-point reduction.

A lower interest rate could boost economic activity and lift oil demand, but it could also signal underlying recession concerns, which would negatively impact demand.

Oil refinery output in China also fell for the fifth consecutive month, reflecting weak fuel demand and disappointing export margins. These factors contribute to the ongoing uncertainty surrounding oil prices.

Attibution: Reuters

Subediting: M. S. Salama