International oil prices rose on Monday, with both U.S. and Brent crude rising by more than 1% as the continued shutdown of U.S. Gulf of Mexico oil infrastructure offset some demand concerns and investors awaited a rate cut by the Federal Reserve this week.
On September 15 local time, the U.S. offshore energy regulator said that due to the impact of Hurricane Francine, nearly one-fifth of crude oil and 28% of natural gas in the federal waters of the U.S. Gulf of Mexico were shut down.
The U.S. Bureau of Safety and Environmental Enforcement estimated based on producer reports that energy producers have shut down production of 338,690 barrels of oil and nearly 515 million cubic feet of natural gas per day in the U.S. Gulf of Mexico.
Recently, "Francine" swept across the major offshore oil and gas producing areas in the United States and landed in Louisiana, the United States on the 11th as a Category 2 hurricane. The hurricane also caused power outages in four southern states of the United States.
The oil market is likely to remain cautious ahead of the Federal Reserve's interest rate decision on Wednesday, said Priyanka Sachdeva, an analyst at Phillip Nova, adding that some supply concerns still supported prices given that some production capacity in the Gulf of Mexico remained offline.
CME Group’s FedWatch showed traders increasingly betting the Fed will cut interest rates by 50 basis points this week instead of 25 basis points. Lower rates typically reduce borrowing costs, boosting economic activity and demand for oil.
However, a 50 basis point rate cut could also signal a weakening U.S. economy, which could raise concerns about oil demand, said OANDA analyst Kelvin Wong.
Meanwhile, Saxo Bank analyst Ole Hansen said trading activity was likely to remain thin ahead of the Fed meeting, adding that "it looks like a coin toss for a 25 or 50 basis point rate cut".
The events come as positioning in the oil market deteriorates. Hedge funds turned net short on Brent crude for the first time ever, and trend-following funds are near their most bearish levels on oil, according to EA Quant Analytics, a sign that one source of selling pressure may now be waning.
Hedge funds turn net bearish on Brent crude for first time ever
“Ongoing supply losses from Libya and improved Russian compliance with production quotas should keep the global oil market in a small counter-seasonal deficit in the fourth quarter,” Citigroup analysts including Max Layton said in a note. “However, we still see a shift coming as the market begins to price in the outlook for 2025, when a surplus is expected.”
Article forwarded from: Jinshi Data
