Oil prices climb on Tuesday amid Hurricane concerns

Oil prices continued their upward trajectory on Tuesday due to concerns about US production disruptions caused by Hurricane Francine and expectations of reduced US crude inventories.

Brent crude futures for November rose 34 cents, or 0.5 per cent, to $73.09 a barrel, while US crude futures for October climbed 49 cents, or 0.7 per cent, to $70.58 a barrel. Both oil contracts rose in the last session due to the effects of Hurricane Francine on US Gulf of Mexico output, offsetting worries about Chinese demand.

The upcoming US Federal Reserve interest rate decision is expected to boost investor confidence in oil. The US Bureau of Safety and Environmental Enforcement reported that over 12 per cent of crude production and 16 per cent of natural gas output in the Gulf of Mexico are still offline.

The Fed is expected to begin its easing cycle on Wednesday, with markets pricing in a 69 per cent chance of a 50-basis-point rate cut. Analysts at ANZ believe that growing expectations of an aggressive rate cut and ongoing supply disruptions are supporting oil markets.

A lower interest rate is expected to reduce borrowing costs and potentially lift oil demand by supporting economic growth. Additionally, investors are anticipating a decline in US crude inventories, which is estimated to have fallen by about 200,000 barrels in the week to September 13.

Despite these positive factors, lower-than-expected demand growth in China has capped price gains. China’s oil refinery output fell for a fifth month in August amid declining fuel demand and weak export margins.

Attribution: Reuters

Subediting: M. S. Salama