Oil prices remain on supply shock, hope of US interest rate cut By Reuters
Written by Shariq Khan and Arunima Kumar
NEW YORK (Reuters) – Oil prices rose by a dollar a barrel on Tuesday as supply disruptions widened and traders bet demand would pick up if the U.S. Federal Reserve cuts borrowing costs this week, as widely expected.
Both contracts hit record highs this month. futures rose $1.10, or 1.6%, to $71.41. Futures gained 95 cents, or 1.3%, to settle at $73.70 a barrel.
More than 12% of crude output from the US Gulf of Mexico was offline after Hurricane Francine last week, pushing up oil prices in four of the last five sessions, a rebound after Brent last Tuesday hit its lowest level in nearly three years.
“Oil prices have been in a recovery mode since Wednesday, probably due to supply problems after Hurricane Francine in the US Gulf of Mexico, and expectations of lower US crude stockpiles,” said Charalampos Pissouros, senior investment analyst at brokerage XM.
U.S. crude oil stockpiles may have fallen by as much as 500,000 barrels in the week ended Sept. 13, according to an extended Reuters survey of analyst estimates. The American Petroleum Association will publish its estimates after 4:30 pm ET, followed by the official US Energy Information Administration report on Wednesday at 10:30 am ET. [EIA/S]
Prices were supported by supply disruptions in Libya, where disagreements between warring parties over control of the central bank led to lower oil production and exports, Rystad analysts said on Tuesday.
United Nations-led talks to resolve the crisis failed to reach an agreement this week.
Exports from Libya tripled last week to about 550,000 barrels a day, a Reuters review of Kpler shipping data showed. That was still a fraction of last month's OPEC producer exports of more than 1 million bpd, the data showed.
Investors also hoped that the Fed's much-anticipated rate cut could revive demand in the top oil-consuming nation.
Fed funds futures are pricing in a 69% chance the central bank will cut rates by 50 basis points.
A cut of that magnitude would soften the US currency and boost oil and other dollar commodities, independent energy and shipping analyst Matias Togni wrote on Tuesday.
There are also signs of improving demand in China, Togni said, where a troubled economy has significantly reduced demand from the biggest oil exporter so far this year. The country's imports are approaching highs this year at more than 11 million bpd this month, he added.
