Production disruptions and expectations of Fed rate cut push Brent crude higher

Brent crude oil prices are rising on Friday, continuing the rally triggered by production disruptions in the Gulf Coast of the United States caused by Hurricane Francine.

On Tuesday, Brent dropped below $70 per barrel for the first time since late 2021. However, the price regained almost 2% over the week. The hurricane led to a significant reduction in oil production in the Gulf of Mexico. The prices were additionally supported by the decline in the dollar.

UBS analysts forecast that hydrocarbon extraction in the Gulf of Mexico in September will drop by 50,000 barrels per day on a month-on-month basis, while FGE experts are expecting a drop of 60,000 barrels. According to the official data, the region's oil production level had already fallen by almost 42% by Thursday.

Despite the rise, the oil price remains 16% below the current quarter's level, as market participants are concerned about shrinking demand from the largest importer, China. According to the monthly report of the International Energy Agency (IEA), global oil consumption growth during the first half of the year was the weakest since the pandemic. This is due to the slowdown in China's economy. As a result, the OPEC+ postponed the easing of its supply restrictions.

Meanwhile, risk sentiment is rising in the market ahead of interest rate cuts by the Federal Reserve (Fed). Next week, the Fed is likely to start easing monetary policy as inflation slows and the labor market weakens. This could support economic growth and increase energy demand, especially if the cut amounts to 50 basis points.

Technical analysis of Brent oil prices shows that a new upward trend is forming after breaking out of the downtrend on the H4 timeframe. The Moving Average of Oscillator (with parameters of 12, 26, 9) is rising in the positive zone, which indicates a potential for further increase in oil prices.

Short-term prospects for Brent oil suggest buying, with the target level of 77.60. Part of the profit should be taken near the level of 74.60. A Stop loss could be set at 68.85.

Since the bullish trend is short-term, the trading volume should not exceed 2% of your total balance to reduce risks.