Oil Prices Jump over Disruption in US Supply, Fed Rate Cut

Oil Prices Jump over Disruption in US Supply, Fed Rate Cut

Oil prices increased in the global commodities, driving energy costs high due to concerns over U.S. supply disruptions triggered by Hurricane Francine. The positive price movement was also boosted by growing expectations that the U.S. Federal Reserve may cut interest rates by 25 or 50 basis points.

Brent crude rose by 0.26% to $72.94 per barrel during early trading hours today.  US benchmark West Texas Intermediate (WTI) increased 0.42% to $69.31 per barrel after closing at $69.02 in the prior session.

Oil prices extended their gains on Tuesday after Hurricane Francine disrupted a significant portion of U.S. oil and gas production. The storm, which hit the U.S. Gulf Coast last week as a Category 2 hurricane, curtailed energy output in the Gulf of Mexico—a key region for U.S. oil and natural gas supply.

According to the Bureau of Safety and Environmental Enforcement, about 12.18% of oil production and 16.02% of natural gas output in the Gulf remains offline as of Monday due to the storm’s impact.

These production cuts are intensifying supply concerns in the market, further pushing oil prices upward. Markets await an interest rate cut decision from the US Federal Reserve (Fed) on Wednesday, which would be the first rate cut since 2020.

Lower interest rates could reduce the cost of borrowing in the country, fueling economic activity and oil demand. Analysts predict that there is a 70% probability that the Fed will cut interest rates by 50 basis points during the meeting.

Ahead of the Fed’s interest rate decision, 3 Democratic senators, including Elizabeth Warren, called on the Fed to reduce the interest rate by 75 basis points to protect the US economy.

The US Energy agency, IEA, monthly oil market report painted a bearish picture. The IEA estimates that global oil demand grew by just 800,000 b/d in the first half of the year and now expects global oil demand to grow by 900,000 b/d in 2024.

China has been the key driver in this slower demand growth. The IEA estimates that Chinese demand fell for a fourth consecutive month in July, declining by 280,000 b/d.

The IEA expects China’s oil demand to grow by just 180,000 b/d this year. Also, the US energy agency estimates that oil inventories declined by 47.1 million barrels in July and preliminary numbers suggest a further decline in August. #Oil Prices Jump over Disruption in US Supply, Fed Rate Cut

Apel Asset Sees 69.84% Upside in Access Holdings Amidst Negative Return