Hurricane Francine and demand concerns, What effects oil prices

Oil prices rose in Asian trading on Thursday due to expectations of supply disruptions following Hurricane Francine, which helped offset persistent concerns about the global crude demand slowdown. As the hurricane made landfall in Louisiana on Wednesday after passing through the Gulf of Mexico, many major oil companies rushed to scale back or suspend their operations, putting additional pressure on the available supplies in the markets.

Despite oil prices reaching their lowest levels in three years earlier this week, expectations of supply cuts played a significant role in supporting the rapid price recovery. However, this rebound has gradually started to lose momentum, raising questions about the sustainability of this upward trend.

Brent crude futures, expiring in November, rose by 0.3% to $70.83 per barrel, while West Texas Intermediate crude futures saw a similar increase of 0.3%, reaching $66.78 per barrel.

Despite these gains, new challenges emerged from government data showing an unexpected increase in gasoline and distillate inventories for the week ending September 6. Although overall inventories saw a slight increase, the significant rise in product inventories raised concerns that U.S. fuel demand might be slowing as the summer travel season, which typically sees higher consumption, comes to an end.

This development has heightened worries about the impact of the anticipated U.S. economic slowdown on fuel consumption in the coming months. Fears of a potential recession in the U.S. weighed heavily on the markets over the past week, further pressuring oil prices.

On the other hand, recent inflation data, which was stronger than expected, indicated that the Federal Reserve may have to reduce interest rates by less than previously anticipated in September. This supported the dollar, which, in turn, added pressure on oil prices due to the inverse relationship between the dollar and commodities.

The Organization of Petroleum Exporting Countries (OPEC) recently cut its forecasts for oil demand growth in 2024 and 2025, citing weaknesses in the Chinese economy, the world’s largest oil importer.

Weak economic data from China was an additional concern for the markets this week. Although China’s oil imports rebounded sharply in August, analysts noted that the recovery was driven primarily by lower oil prices rather than improved demand.

Moreover, other economic indicators from China showed that the country’s economy remains under significant pressure, with continued weak performance in August, further complicating the overall outlook for the global oil markets in the coming months.

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