By Arunima Kumar

(Reuters) -Oil prices were little changed on Monday after last week’s cut in U.S. interest rates and a dip in supply in the aftermath of Hurricane Francine countered weaker demand from top oil importer China.

futures for November were down by 6 cents, or 0.1%, to $74.43 a barrel by 1253 GMT. U.S. crude futures for November were up 4 cents, or 0.1%, at $71.04.

Oil prices were buoyed last week by the U.S. Federal Reserve’s decision to cut interest rates by 50 basis points and signal further cuts by end of the year, though weaker demand from China is limiting the upside, said Charalampos Pissouros, senior investment analyst at brokerage XM.

Both oil benchmarks rose more than 4% last week.

“Oil looks rangebound despite the uplift to risky asset prices from an outsized policy rate cut by the Fed last week,” said Harry Tchilinguirian, head of research at Onyx Capital Group

“The market will look to flash purchasing managers’ index (PMI) releases in Europe and the U.S. for economic direction, and if these disappoint, then there is likely to be downward pressure developing on oil prices.”

Euro zone business activity contracted sharply and unexpectedly this month as the bloc’s dominant services industry flatlined while a downturn in manufacturing accelerated, a survey showed on Monday.

A softer economic outlook from top consumer China capped further gains.

“There was some hope earlier this morning that some additional Chinese monetary stimulus is likely in the short term, but the latest PMI out of Europe switched market sentiment from positive to negative,” said UBS analyst Giovanni Staunovo.

“I would expect oil to benefit this week from a large U.S. crude draw as result of elevated U.S. crude exports.”

However, heightened conflict in the Middle East could curtail regional supply.

The Israeli military launched its most widespread wave of airstrikes against Iran-backed Hezbollah, targeting Lebanon’s south, eastern Bekaa valley and northern region near Syria simultaneously after nearly a year of conflict.

“The market could continue to react to the escalating tensions in the Middle East as confrontations between Israel and Hezbollah continue. Heightened concerns over a broader conflict disrupting regional oil supplies could add upward pressure to the market,” said BDSwiss market strategist Mazen Salhab.

Investing.com– Oil prices edged higher in choppy trade Monday as raised Middle East tensions added to recent gains as the prospect of lower interest rates pushed up hopes that demand will improve. 

At 08:50 ET (12:50 GMT),  rose 0.1% to $73.72 a barrel, while climbed 0.1% to $71.07 a barrel.

Fed rate cut boosts oil, more economic cues awaited 

Crude prices slipped slightly lower after a two-week rebound from near three-year lows, helped by the decision of the Federal Reserve to cut interest rates sharply.

The move pushed up hopes that lower rates will foster economic growth in the coming months, in turn helping spur increased crude demand. 

Both oil benchmarks rose more than 4% last week.

More cues on the Fed are due this week, with a string of officials- most notably – set to speak in the coming days. The Fed’s preferred inflation gauge- data- is also due on Friday. 

Beyond the Fed, the and the are set to meet this week, with both banks likely to cut interest rates. 

Middle East tensions remain in play 

Traders were seen attaching a risk premium to oil prices amid few signs of receding tensions in the Middle East. 

Israel continued to carry out strikes in Gaza and Lebanon, keeping concerns of an all-out war in the region largely in play. Hezbollah had recently vowed retaliation against Israel after the country allegedly detonated several electronic devices used by the Lebanese group. 

The constant fighting and threats of war pushed up concerns that a bigger conflict in the Middle East will disrupt supplies in the oil-rich region, tightening global markets. 

Sentiment “decisively bearish” 

However, analysts at Bank of America noted that “sentiment among energy investors has turned decisively bearish” due to plans by the Organization of the Petroleum Exporting Countries and its allies — known as OPEC+ — to phase out additional voluntary output cuts.

The oil group is set to gradually bring back 2.2 million barrels per day from December 2024 until November 2025, although this timeline was itself earlier delayed by two months.

“Speculative net positioning in total petroleum futures and options recently dropped to the lowest levels since at least 2011, suggesting investors are already more than positioned for a falling energy price environment,” the Bank of America analysts said.

(Ambar Warrick contributed to this article.)

By Georgina McCartney

(Reuters) – Oil prices settled lower on Friday but recorded a second straight week of gains, garnering support from a U.S. interest rate cut and a dip in U.S. supply.

futures settled down 39 cents, or 0.52%, at $74.49 a barrel. U.S. WTI crude futures settled down 3 cents, or 0.4%, to $71.92.

Signs of a slowing economy in major commodity consumer China gave prices a ceiling. But for the week, both benchmarks settled up more than 4%.

Prices have recovered after Brent fell below $69 for the first time in nearly three years on Sept. 10.

“The market concluded that a sub-$70 level combined with hedge funds holding a record weak belief in higher prices of crude and fuel products would require a recession to be justified, a risk this week’s bumper U.S. rate cut helped reduce,” Ole Hansen, head of commodity strategy at Saxo Bank, said.

Prices rose more than 1% on Thursday, a day after the U.S. central bank’s decision to cut interest rates by half a percentage point.

Interest rate cuts typically boost economic activity and energy demand, but some analysts are worried about weakness in the U.S. labour market.

“U.S. interest rate cuts have supported risk sentiment, weakened the dollar and supported crude this week,” said Giovanni Staunovo, an analyst at UBS.

“However, it takes time until rate cuts support economic activity and oil demand growth,” he added.

The Fed projected a further 50 basis points of rate cuts by the end of this year, a full percentage point of cuts next year and a further half-percentage-point reduction in 2026.

“The Fed’s decision to cut interest rates and some hangover from Hurricane Francine are the only two things that are propping up the market up right now,” said Tim Snyder, chief economist at Matador Economics.

“The thought of another 50 to 75 basis points has markets hopeful for some degree of economic stability,” he added.

About 6% of crude production and 10% of output in the U.S. Gulf of Mexico were offline in the aftermath of Hurricane Francine, the U.S. Bureau of Safety and Environmental Enforcement said on Thursday in its final update on the storm.

Additional support for oil prices came from a decline in inventories to a one-year low last week. [EIA/S]

Rising tensions in the Middle East, raising the risk of supply disruption, further boosted the oil market. Israel announced on Friday it killed a top Hezbollah commander and other senior figures in the Lebanese movement in an airstrike on Beirut as fears of a wider war rise.

Still, U.S. President Joe Biden said reaching a Gaza ceasefire deal remains realistic, telling reporters: “We have to keep at it.”

In China, refinery output slowed for a fifth straight month in August and industrial output growth hit a five-month low.

China also issued its third and likely final batch of fuel export quotas for the year, keeping volume in line with 2023 levels. “This move indicates that refinery margins are too weak to justify increased activity,” StoneX Analyst Alex Hodes said in a note on Friday.

Meanwhile, oil refiners in Asia, Europe and the U.S. face a drop in profitability to multi-year lows.