Sep 23 2024: Oil prices rose slightly on Monday, supported by last week’s U.S. interest rate cut and a decrease in U.S. crude supply following Hurricane Francine, despite weaker demand from China, the world’s largest oil importer.
Brent crude futures for November increased by 14 cents, or 0.19%, to $74.63 a barrel by 0815 GMT, while U.S. crude futures for November rose 16 cents, or 0.23%, to $71.16 a barrel.
Both contracts posted their second consecutive weekly gains last week, after the U.S. Federal Reserve made a larger-than-expected interest rate cut of half a percentage point, lowering borrowing costs and boosting riskier asset prices, including oil.
“Despite the uplift in risky assets following the Fed’s outsized rate cut, oil prices remain rangebound,” said Harry Tchilinguirian, head of research at Onyx Capital Group. He added that upcoming economic indicators, such as the flash Purchasing Managers’ Index (PMI) for Europe and the U.S., could influence oil prices. If these indicators fall short of expectations, downward pressure on oil could increase.
Eurozone business activity showed a sharp and unexpected contraction this month, with the services sector stagnating and manufacturing weakening further, according to Monday’s survey. A softer economic outlook in China also limited oil price gains.
“There was optimism earlier about potential Chinese monetary stimulus, but weak European PMI data dampened market sentiment,” said UBS analyst Giovanni Staunovo. However, Staunovo expects oil prices to benefit from a likely large draw in U.S. crude stockpiles due to high U.S. crude exports.
Geopolitical Risks and Supply Concerns
Rising geopolitical tensions in the Middle East could also support oil prices. The Israeli military launched its most extensive wave of air strikes against Iran-backed Hezbollah, targeting areas in southern Lebanon, the Bekaa Valley, and northern Lebanon near Syria. “The escalating conflict between Israel and Hezbollah could further support oil prices on concerns about a wider regional conflict,” noted IG market strategist Yeap Jun Rong.
