Oil extends gains on U.S. production concerns, stocks expected to fall Reuters

By Jeslyn Lerh

SINGAPORE (Reuters) – Oil prices extended gains on Tuesday as the market tracked concerns over U.S. output in the wake of Hurricane Francine and expectations of lower inventories.

November futures were up 16 cents, or 0.2 percent, at $72.91 a barrel by 0120 GMT. U.S. crude futures for October were up 34 cents, or 0.5 percent, at $70.43 a barrel.

Both contracts settled higher in the previous session as Hurricane Francine’s continued impact on US Gulf of Mexico output countered concerns about Chinese demand ahead of the US Federal Reserve’s interest rate cut decision this week, which should prove positive for oil investor sentiment.

More than 12 percent of crude oil production and 16 percent of U.S. Gulf of Mexico production were offline, according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE) on Monday.

The market is closely watching the upcoming decision of the US Federal Reserve on the interest rate cut. A lower interest rate will reduce the cost of borrowing and may increase oil demand by supporting economic growth.

“Rising expectations of an aggressive interest rate cut boosted sentiment in the commodities complex,” ANZ analysts said in a note, adding that ongoing supply disruptions also supported oil markets.

Investors also eyed an expected decline in U.S. crude stockpiles, which likely fell by about 200,000 barrels in the week to Sept. 13, according to a Reuters poll. (EIA/S)

However, weaker-than-expected demand growth in China, the world’s biggest crude importer, capped price gains. China’s oil refinery output fell for a fifth month in August amid falling fuel demand and weak export margins, government data showed on Saturday.