U.S. rate cut buoys oil prices amid weaker Chinese demand

Business a.m.

Oil prices ticked upward on Monday, as the after-effects of Hurricane Francine-induced disruptions to U.S. crude supply and a Federal Reserve cut to interest rates offset weaker demand from the world’s top oil importer, China.

Brent crude futures for November climbed $0.19, or 0.19 percent, to settle at $74.63 a barrel, while U.S. crude futures for November ticked up by $0.23, or 0.23 percent, to reach $71.16.

The oil benchmarks registered their second consecutive weekly gains last week, buoyed by the U.S. Federal Reserve’s decision to lower interest rates by 0.5 percent, exceeding market expectations and pumping optimism into the market.

Industry expert Harry Tchilinguirian, head of research at Onyx Capital Group, noted that despite the boost to risky asset prices from the Federal Reserve’s substantial policy rate cut last week, oil prices remained rangebound, with potential for further downside risks should key economic indicators disappoint.

Reports showed that a softer economic outlook from top consumer China capped further gains.

Industry expert Giovanni Staunovo, UBS analyst, highlighted that there had been some optimism earlier in the day about the potential for additional monetary stimulus from China in the near term. However, the latest PMI data out of Europe flipped market sentiment from positive to negative.

In addition, Staunovo expressed his belief that despite the negative market sentiment, oil prices would likely benefit from a substantial drawdown in U.S. crude inventories this week, primarily driven by elevated exports of U.S. crude oil.