By Adedapo Adesanya
The price of oil went up on Tuesday as supply disruptions mounted as traders expected that demand would grow if the US Federal Reserve lowers borrowing costs this week.
Brent crude futures gained 95 cents or 1.3 per cent to settle at $73.70 per barrel and the US West Texas Intermediate (WTI) grew by $1.10 or 1.6 per cent to $71.41 a barrel.
This marked both contracts’ highest settlement so far this month after a tumultuous start.
The gain had started after more than 12 per cent of crude output from the U.S. Gulf of Mexico was offline due to Hurricane Francine last week, lifting oil prices in four of the previous five sessions.
Reuters reported that prices also found support from renewed tensions in the Middle East after militant group Hezbollah promised to retaliate against Israel after fresh attacks occurred across Lebanon on Tuesday, killing at least eight people and wounding nearly 3,000 others, including fighters and Iran’s envoy to Beirut.
Prices drew support from supply disruption in Libya, where a rift between rival factions over control of the central bank has led to lower oil output and exports.
So far, talks led by the United Nations to solve the crisis in the country which is a member of the Organisation of the Petroleum Exporting Countries (OPEC) failed to reach an agreement.
However, Libyan crude exports rose three-fold last week to about 550,000 barrels per day, which is half the OPEC producer’s exports last month of over 1 million barrels per day.
Investors also hoped the US Federal Reserve’s widely anticipated rate cut could revitalize demand in the top oil-consuming nation.
There is an increasing chance that the US central bank will cut rates by 50 basis points, a move that market analysts say could soften the US currency and boost oil and other Dollar-denominated commodities.
There are also signs of improving demand in China as the country’s imports are approaching this year’s highest levels at over 11 million barrels per day this month. This is good news as a turbulent economy has heavily dented demand from the top oil importer in the past few months.
Crude oil inventories in the US rose by 1.96 million barrels for the week ending September 13, according to the American Petroleum Institute (API). Analysts had expected a 100,000-barrel drop.
For the week prior, the API reported a 2.79-million-barrel decrease in crude inventories. So far this year, crude oil inventories are 10.9 million barrels under where they were at the start of the year, according to API data.
The official data from the US Energy Information Administration (EIA) will be released later on Wednesday.