Oil prices rose slightly in Asian markets on Monday, driven by expectations of a U.S. interest rate cut. However, these gains were limited by ongoing concerns about demand and weak economic data from China. Brent crude futures for November increased by 38 cents, reaching $71.99 a barrel, while U.S. crude futures for October went up by 49 cents, settling at $69.14. Both benchmarks had dropped in the previous session, as fears of supply disruptions lessened with the resumption of crude production in the Gulf of Mexico following Hurricane Francine.
Despite production resuming, nearly 20% of oil output and 28% of natural gas production in the Gulf remain offline. Analysts noted that markets were watching closely for the upcoming Federal Open Market Committee (FOMC) policy decisions, and traders were expected to remain cautious. The FOMC meeting, scheduled for September 17-18, is anticipated to reveal whether the U.S. central bank will cut interest rates by 25 or 50 basis points. While lower interest rates typically stimulate economic activity and increase oil demand, some analysts fear that a larger cut may indicate underlying recession risks, which could dampen demand.
Concerns were further heightened by weak economic data from China, the world’s largest oil importer. Industrial output growth in China slowed to a five-month low in August, and retail sales, along with new home prices, continued to weaken. This data led to speculation about a potential deflationary spiral, reinforcing doubts about the sustainability of the oil market rebound. Some analysts believe that this could prevent prices from breaking key resistance levels in the near future.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
