New York/IBNS: Oil prices surged by nearly 2 percent on Monday (Sept. 16), buoyed by continued disruptions to U.S. Gulf Coast oil production, despite ongoing concerns about demand stemming from weak economic data from China.
Investors are also anticipating a potential interest rate cut from the U.S. Federal Reserve later this week.
As of 1315 GMT, Brent crude futures for November delivery rose by $1.40, or 1.96 percent, to settle at $73.01 per barrel.
U.S. West Texas Intermediate (WTI) crude for October delivery increased by $1.60, or 2.33 percent, reaching $70.25 per barrel.
Reuters reported, quoting Phillip Nova analyst Priyanka Sachdeva, that the market is likely to remain cautious ahead of the Federal Reserves interest rate decision on Wednesday.
Supply concerns, particularly due to some production remaining offline in the Gulf of Mexico, are providing additional support to oil prices, Sachdeva told Reuters.
Market participants are increasingly expecting a 50 basis point interest rate cut by the Fed, as indicated by the CME FedWatch tool, which tracks federal fund futures.
Typically, lower interest rates reduce borrowing costs, potentially boosting economic activity and increasing oil demand.
However, a 50 basis point rate cut could also signal weakness in the U.S. economy, which might dampen future oil demand, noted Kelvin Wong, a market analyst at OANDA, speaking to Reuters.
On the demand side, Chinas industrial output growth, the worlds largest oil importer, slowed to a five-month low in August.
Additionally, retail sales and new home prices fell, while refinery output dropped for the fifth consecutive month due to weak fuel demand and shrinking export margins.
While both Brent and WTI crude prices rose by around 1 percent last week, they remain well below their average levels from August, which stood at $78.88 and $75.43 per barrel, respectively.
Early-month concerns over demand significantly influenced this decline, as per reports.
