In the early hours of Monday, oil prices saw a slight increase as there is anticipation of a U.S. interest rate cut this week. However, gains were limited due to U.S. supply resumptions post-Hurricane Francine and weaker data from China.
Oil futures for November were up by 15 cents, or 0.2%, reaching $71.76 a barrel at 0015 GMT. Additionally, futures for October saw a 23-cent, or 0.3%, increase to $68.88 a barrel.
Although both contracts closed lower in the previous session, concerns about supply disruptions have eased with Gulf of Mexico crude production resuming after Hurricane Francine. Moreover, data showing a weekly rise in the U.S. rig count added pressure.
However, a significant portion of crude oil production and output in the Gulf of Mexico remains offline post-hurricane.
One key factor that will have a significant impact on the market this week is the U.S. Federal Reserve's decision on the interest rate cut following its meeting on September 17-18. Fed fund futures indicate that investors are leaning towards a 50 basis point cut instead of the expected 25 bps, according to CME FedWatch.
Lower interest rates can lead to a reduction in borrowing costs, which might stimulate economic activity and increase demand for oil.
On the other hand, in China, the largest oil importer globally, industrial output growth slowed to a five-month low in August. Additionally, retail sales, new home prices, and oil refinery output also witnessed declines. Weak fuel demand and export margins have contributed to the production slowdown.
Meanwhile, the dollar remained stable after reports of a thwarted assassination attempt on Republican presidential candidate Donald Trump outside his Florida golf course.
In the Middle East, Israeli Prime Minister Benjamin Netanyahu warned of retaliation against the Iran-aligned Houthis after they fired a missile that reached central Israel for the first time on Sunday.
Analysis:
The current market conditions are influenced by a mix of factors such as expectations of a U.S. interest rate cut, supply resumptions post-Hurricane Francine, and weaker data from China. Investors are closely monitoring the decisions of the U.S. Federal Reserve and geopolitical tensions in the Middle East. These developments can impact oil prices and financial markets globally. It is crucial for investors and individuals to stay informed about these events as they can have significant implications for their finances and investments.