Crude Production Offline, Fed Decision Sparks Oil Market Optimism

Petroleum Price

• Oil prices extended gains on Tuesday as the market eyed U.S. output concerns in the aftermath of Hurricane Francine and anticipated lower U.S. crude stockpiles.
• Brent crude futures for November rose by 16 cents, or 0.2%, to $72.91 a barrel at 0120 GMT. U.S. crude futures for October climbed by 34 cents, or 0.5%, to $70.43 a barrel.
• Both contracts settled higher in the previous session as the ongoing impact of Hurricane Francine on output in the U.S. Gulf of Mexico countered Chinese demand concerns ahead of this week’s U.S. Federal Reserve interest rate cut decision, which is expected to be positive for investor sentiment in oil. MCX crude oil prices opened at 5,922 with a gain of 0.59%.

Petroleum Demand and Supply

• More than 12% of crude production and 16% of natural gas output in the U.S. Gulf of Mexico were offline, according to the U.S. Bureau of Safety and Environmental Enforcement on Monday.
• The market is closely watching the upcoming decision by the U.S. Federal Reserve regarding the interest rate cut. A lower interest rate will reduce the cost of borrowing and can potentially lift oil demand by supporting economic growth.
• Investors are also eyeing an expected drop in U.S. crude inventories, which likely fell by about 200,000 barrels in the week till September 13, based on a Reuters poll.

Petroleum News

• Malaysia has maintained its October export tax for crude palm oil at 8% and lowered its reference price, a circular on the Malaysian Palm Oil Board website showed on Tuesday.
• The world’s second-largest palm exporter calculated a reference price of RM3,839.10 per metric ton for October. September’s reference price was RM3,915.19 a ton.
• The export tax structure starts at 3% for crude palm oil in the RM2,250 to RM2,400 per ton range. The maximum tax rate is set at 8% when prices exceed RM3,450 a ton.
• China’s industrial output growth, the largest oil importer globally, slowed to a five-month low in August, with further declines in retail sales and new home prices.
• Additionally, the country’s oil refinery output decreased for the fifth consecutive month due to weak fuel demand and reduced export margins.

Expert Opinion

The market remains cautious ahead of the Federal Reserve’s interest rate decision scheduled for Wednesday. Traders are increasingly leaning towards a 50 basis point rate cut by the Fed, rather than a 25 basis point reduction, as indicated by the CME FedWatch tool that monitors Fed fund futures.