Oil prices edge higher as investors wait for further clarity on interest rates

Libya has closed four major oil ports after Storm Daniel caused devastating floods in the country

The US Federal Reserve building is pictured in Washington. Fed officials are expected to meet next week. central Reuters.

Oil prices edged higher on Tuesday boosted by Opec+ supply cuts and as investors awaited key macroeconomic data that could signal the direction of interest rates.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.68 per cent higher at $91.26 a barrel at 4.11pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.82 per cent at $88.01 a barrel.

On Monday, Brent settled 0.01 per cent lower at $90.64 a barrel, while WTI closed down 0.25 per cent at $87.29 a barrel.

"Oil prices are creeping higher again on Tuesday ... despite there being a mixed view on the economic outlook," said Craig Erlam, senior market analyst at Oanda.

"As we heard from the European Commission yesterday, growth in the euro area is going to be relatively minor, with Germany struggling to avoid another recession. The UK has shown a lot more resilience than anticipated but still faces recession risks and marginal growth at best," Mr Erlam said.

"One thing we're guaranteed is supply to continue to be restricted until the end of the year at least following the recent announcement by Saudi Arabia and Russia."

The US consumer price index data for August is expected to be released on Wednesday, a week ahead of the US Federal Reserve Policy meeting on September 19-20.

After pausing its tightening cycle in June, the Fed increased its policy rate in July for the 11th time since March 2022, as it aims to bring inflation down to its 2 per cent target range.

Fed Chair Jerome Powell has warned the central bank may not be done raising interest rates, arguing more proof is needed to show a cooling economy.

Higher interest rates dampen economic growth, lowering crude demand.

Meanwhile, US car workers are set to go on strike this week if carmakers General Motors, Ford and Stellantis fail to meet their demands for pay raises and the restoration of concessions.

A 10-day strike could reduce US gross domestic product by $5.6 billion, Mr Moya said.

Last week, Goldman Sachs said the probability of the US economy, the world’s largest, slipping into a recession had declined further amid encouraging inflation and job market trends.

The chances of an economic contraction in the US dropped to 15 per cent over the 12-month period, down from a previous estimate of 20 per cent, the biggest US investment bank said in its latest economic views report.

The US economy grew at a higher-than-expected 2.4 per cent in the second quarter of this year. Bloomberg economists had forecast a GDP growth rate of 1.8 per cent.

Libya, Opec’s seventh-largest crude oil producer, has closed four major oil ports after Storm Daniel caused devastating floods in the North African country.

The oil ports – Ras Lanuf, Zueitina, Brega and Es Sidra – were closed from Saturday evening for three days, Reuters reported on Monday, citing two oil engineers.

The closure of the ports will lead to some export disruptions, but those exports are "likely" to recover once the ports re-open, Giovanni Staunovo, strategist at UBS, told The National.

"I am not aware of any production disruptions at the moment," he added.

On September 10, Libya's National Oil Corporation said the country's crude production reached 1.213 million barrels a day.

Opec+ and the International Energy Agency will release their monthly oil market reports this week.

The Paris-based agency expects demand to expand by a record 2.2 million bpd this year, supported by a recovery in China’s economy, the second largest in the world.

However, the Asian country's post-coronavirus economic recovery has lost momentum mainly due to a deepening property slump and weak consumer spending.

China, the world’s largest crude importer, has announced a string of stimulus measures over the past few weeks, including halving the stamp duty on stock transactions and easing mortgage rates.

China's consumer price index rose by 0.1 per cent in August, after falling by 0.3 per cent in July, the National Bureau of Statistics said at the weekend.