Oil prices rose as Hurricane Milton heightened supply threats, compounding existing uncertainty from Middle East tensions. Brent crude rose to US$77.28 per barrel, while West Texas Intermediate crude rose to US$73.98, despite China’s dismal demand outlook.
Brent fell to $77 a barrel yesterday, down roughly 5% for the day, along with other commodities, as concerns about Chinese demand weighed on market mood, according to an ING note.
According to analysts, the American Petroleum Institute’s (API) negative inventory data increased short-term pressure on oil prices. Prices have steadied this morning as attention moves to supply issues in the United States owing to Hurricane Milton.
Recent sources imply that Pemex shut down oil platforms and crude-exporting facilities in the Gulf of Mexico due to the hurricane. It was reported that some of the offshore oil platforms were also shut due to the rising hurricane threat.
The API stated that US crude oil stockpiles increased by 10.9 million barrels last week, exceeding the market consensus of just 1.3 million barrels.
Crude stockpiles at Cushing rose by 1.4 million barrels. Meanwhile, product inventories fell during the reporting week, with gasoline stocks down by 0.6 million barrels and distillate inventories falling by 2.6 million barrels, in line with market expectations.
The latest Short-Term Energy Outlook from the EIA showed that US crude oil output predictions have been revised downward. The agency anticipates US crude oil output growth to decelerate to 290k b/d year on year, down from its previous estimate of 320k b/d.
The administration now estimates production at 13.22 million barrels per day for 2024. For 2025, the oil output projections were lowered from 13.67 m b/d to 13.54m b/d.
ING analysts said these revisions come as the number of oil rigs operating in the US has been declining for some time now. For US natural gas output, the EIA forecast that dry gas production could fall by 0.3bcf/d this year compared to earlier estimates of 0.4bcf/d of fall. Growth for 2025 has also been trimmed from 1.4bcf/d last month to 1.1bcf/d currently.
Ongoing conflicts in the Middle East, where most of the world’s hydrocarbon resources are located, support price increase. The fight between the Israeli army and Hezbollah has been ongoing since Oct. 2023.
The Lebanese Hezbollah group announced Wednesday it had repelled two attempted incursions by Israeli forces into southern Lebanon with artillery and rocket fire, resulting in injuries among Israeli soldiers. A second statement from the group detailed a similar confrontation in the town of Blida.
Despite warnings from international observers about the growing risk of a regional war, Israel expanded the conflict on Oct. 1, initiating a ground invasion into southern Lebanon as it maintains its devastating offensive against Hezbollah and Gaza.
Oil prices fell by more than 4% on Tuesday following news flow that Hezbollah wanted a cease-fire with Israel, though some question the timing of the call for a cease-fire.
The US State Department spokesman Matthew Miller reacted Tuesday to the cease-fire efforts, saying, ‘Where have they been for a year? For a year, the world has been calling on Hezbollah to stop the attacks across the border into Israel.’
Positive economic developments in the US amid steady economic growth and low unemployment also aided the rise in oil prices. While optimism continues in the US that inflation will be reduced to the targeted level before the economy goes into recession, experts are awaiting the inflation data scheduled for Thursday for further clues about economic activity.
Experts noted that the upcoming inflation data may give signals about whether the US economy will make a soft landing. In addition, the Federal Open Market Committee (FOMC) meeting minutes are expected to give possible cues about future policies.
Analyst expect that the US Federal Reserve (Fed) will cut interest rates by 25 basis points each in the two Fed meetings until the end of the year.
