By Jeslyn Lerh
SINGAPORE (Multibagger) - Oil prices continued their upward trajectory on Tuesday as the market monitored U.S. output worries following Hurricane Francine and anticipated reductions in stockpiles.
Oil futures for November saw a 0.2% increase, rising by 16 cents to $72.91 a barrel at 0120 GMT. Meanwhile, U.S. crude futures for October climbed 0.5% with a 34-cent increase to $70.43 a barrel.
Both contracts closed higher in the previous session as the lingering effects of Hurricane Francine on U.S. Gulf of Mexico output offset concerns about Chinese demand ahead of the upcoming U.S. Federal Reserve interest rate cut decision, which is expected to have a positive impact on investor sentiment in the oil market.
More than 12% of crude production and 16% of natural gas output in the U.S. Gulf of Mexico were offline, according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE) on Monday.
The market is closely monitoring the Federal Reserve's interest rate cut decision. A lower interest rate could lower borrowing costs and potentially boost oil demand by supporting economic growth.
"Growing expectations of an aggressive rate cut have lifted sentiment throughout the commodities complex," noted ANZ analysts in a statement, highlighting that ongoing supply disruptions are also providing support to oil markets.
Investors are also anticipating a decrease in U.S. crude inventories, with expectations of a 200,000-barrel decline in the week ending Sept. 13, based on a Multibagger poll.
However, subdued demand growth in China, the world's largest crude importer, has limited price gains. China's oil refinery output declined for the fifth consecutive month in August due to weakening fuel demand and poor export margins, as per government data released on Saturday.
Analysis:
Oil prices are on the rise due to concerns about U.S. output following Hurricane Francine and expectations of lower stockpiles. The ongoing impact of the hurricane on production in the U.S. Gulf of Mexico, coupled with anticipation of a Federal Reserve interest rate cut, has bolstered investor sentiment in the oil market. Supply disruptions and expectations of a decrease in U.S. crude inventories are supporting prices. However, subdued demand growth in China is putting a cap on price gains.