Oil Prices Rise 2% as Hurricane Francine Disrupts Production

Almost one-fifth of crude oil production and 28% of natural gas production in the Gulf of Mexico remained offline following Hurricane Francine, according to a report by the U.S. offshore energy regulator on Sunday.

Oil prices rose by 2% on Monday, as the impact of Hurricane Francine on Gulf of Mexico production outweighed ongoing concerns about Chinese demand ahead of the U.S. Federal Reserve’s decision on interest rate cuts this week.

Brent crude futures for November gained $1.35, or 1.89%, to $72.96 per barrel, while U.S. crude futures (WTI) for October rose $1.70, or 2.48%, to $70.35 per barrel. Almost one-fifth of crude oil production and 28% of natural gas production in the Gulf of Mexico remained offline following Hurricane Francine, the U.S. offshore energy regulator reported on Sunday.

Overall, however, the market remains cautious ahead of the Federal Reserve’s interest rate decision on Wednesday.

Traders are increasingly betting on a 50-basis-point rate cut by the Fed, instead of 25, according to CME’s FedWatch tool, which tracks Fed funds futures.

Lower interest rates typically reduce borrowing costs, potentially boosting economic activity and increasing oil demand. However, a 50-basis-point cut could also signal weakness in the U.S. economy, raising concerns about future oil demand.

Weak economic data from China over the weekend dampened market confidence, and the long-term low-growth outlook for the world’s second-largest economy has reinforced doubts about future oil demand.