Source: Jin10 Data
Author: Wu Yu.
Nearly 20% of crude oil production in the Gulf of Mexico in the United States has been halted, and with the imminent interest rate cut by the Federal Reserve, it has provided support for oil prices, but the market may still remain cautious.
Due to the continuous production shutdown of the oil infrastructure in the Gulf of Mexico in the United States, which offset some of the demand concerns, and investors waiting for the Federal Reserve to cut interest rates this week, international oil prices rose on Monday, with WTI and Brent crude oil both up more than 1%.
On September 15th local time, the U.S. offshore energy regulatory agency stated that due to the impact of Hurricane "Francine", nearly one-fifth of crude oil and 28% of natural gas in the U.S. federal waters of the Gulf of Mexico are in a shut-in state.
According to estimates by the US Bureau of Safety and Environmental Enforcement based on reports from producers, energy producers have halted production of 338,690 barrels of oil and nearly 0.515 billion cubic feet of natural gas in the US waters of the Gulf of Mexico each day.
Recently, Hurricane "Francine" swept through the major offshore oil and gas production areas in the United States and made landfall in Louisiana, USA on the 11th as a Category 2 hurricane. The hurricane also caused power outages in four southern states of the United States.
Phillip Nova analyst Priyanka Sachdeva said that the oil market may remain cautious before the Federal Reserve makes its interest rate decision on Wednesday. She also added that some supply concerns still support oil prices, considering that some production capacity in the Gulf of Mexico is still offline.
CME's FedWatch shows that traders are increasingly betting that the Federal Reserve will cut interest rates by 50 basis points this week instead of 25 basis points. Lower interest rates typically reduce borrowing costs, thereby stimulating economic activity and boosting demand for oil.
However, OANDA analyst Kelvin Wong suggests that a 50 basis point rate cut may also indicate a weak US economy, which could raise concerns about oil demand.
Meanwhile, Ole Hansen, analyst at Saxo Bank, says that trading activity may remain subdued before the Fed meeting, stating, "The probability of a 25 or 50 basis point rate cut looks like flipping a coin."
These events are occurring at a time when positions in the oil market are deteriorating. EA Quant Analytics data shows that hedge funds have turned net bearish on Brent crude for the first time ever, and trend-following funds are approaching their most bearish level in the oil market, indicating that one source of selling pressure may now be diminishing.
Hedge funds have turned net bearish on Brent crude for the first time ever.
Analysts at Citigroup, including Max Layton, state in a report, "Continued supply losses in Libya and improved compliance with production limits by Russia should keep the global oil market in a small seasonal deficit in the fourth quarter. However, as the market begins to price in the outlook for 2025, we still foresee a shift on the horizon, with an expected surplus by then."
Editor/rice