Oil prices inch up on Fed rate cut outlook
Shafaq News/ Oil prices edged up in early trade on Monday amidexpectations of a U.S. interest rate cut this week, though gains were capped byweaker China data and persistent demand worries.
Brent crude futures for November were up 3 cents at $71.64 a barrel at0402 GMT. U.S. crude futures for October were up 16 cents, or 0.2%, at $68.81 abarrel.
Both contracts had settled lower in the previous session, with concernsabout supply disruptions easing as Gulf of Mexico crude production resumedfollowing Hurricane Francine and as rising data showed a weekly rise in U.S.rig count.
Still, nearly a fifth of crude oil production and 28% of natural gasoutput in the Gulf of Mexico remain offline in the hurricane's aftermath.
"Markets are focused on upcoming FOMC policy decisions and tradersare likely to stay cautious," said Phillip Nova senior market analystPriyanka Sachdeva, adding that prices are still supported by some supply worriesgiven the offline capacity in Gulf of Mexico.
A key factor that will dominate the market this week is how aggressive arate cut the Federal Open Market Committee (FOMC) will deliver following itsSept. 17-18 meeting. Fed fund futures show investors are increasingly bettingthe U.S. central bank will cut by 50 basis points instead of 25 bps, accordingto CME FedWatch, opens new tab.
Lower interest rates will reduce the cost of borrowing, which can boosteconomic activity and lift demand for oil.
"While a cut is priced in, the uncertainty is whether we get a 25bpor 50bp cut. A 50bp cut could be slightly bearish for oil as it may raiserecession fears," ING analysts said in a client note.
In China, the biggest oil importer, industrial output growth slowed to afive-month low in August, while retail sales and new home prices weakenedfurther. Oil refinery output also fell for a fifth month as disappointing fueldemand and weak export margins curbed production.
"Demand fears have left speculators increasingly bearish towardsthe oil market," said ING analysts, adding that the ICE Brent market isseeing speculators with net short trading positions for the first time.
Meanwhile, the U.S. dollar remained steady after Republican presidentialcandidate Donald Trump was declared safe following what the FBI said appearedto be a second assassination attempt outside his golf course in Florida.
(Reuters)
