New York, Oct 10 (Reuters) – Oil prices surged by about 4% on Thursday due to rising fuel demand in the U.S. before Hurricane Milton hit Florida, ongoing Middle East supply risks, and signs of potential energy demand growth in the U.S. and China.
Brent crude futures increased by $2.82, or 3.7%, reaching $79.40 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose by $2.61, or 3.6%, settling at $75.85 per barrel.
In the U.S., the largest oil producer and consumer globally, Hurricane Milton caused a significant impact on Florida’s fuel supply. Around a quarter of fuel stations ran out of gasoline, and the storm left more than 3.4 million homes and businesses without power. Analysts from Ritterbusch and Associates, an energy advisory firm, noted in a report, “Several product terminals are closed, tanker truck deliveries have been delayed, and pipeline movements have been disrupted. These factors will likely affect supply into the next week, given the widespread power outages.”
The uncertainty surrounding Florida’s fuel infrastructure has helped to boost gasoline prices. U.S. gasoline futures led the energy market on Thursday, closing with a 4.1% increase.
Middle East Tensions Impact Oil Market
Earlier in October, oil prices spiked after Iran fired over 180 missiles at Israel on October 1, raising concerns about potential retaliation against Iranian oil infrastructure. Although Israel has not yet retaliated, oil prices have remained relatively steady this week. However, investors remain cautious. Israeli Defense Minister Yoav Gallant warned that any future strike on Iran would be “lethal, precise, and surprising.”
Iran, a member of OPEC, produced about 4 million barrels of fuel per day in 2023, according to U.S. Energy Information Administration (EIA) data. Iran supports several groups engaged in conflict with Israel, including Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen.
Tensions in the region remain high. Israeli airstrikes on central Beirut killed 11 people and injured 48 on Thursday night, according to Lebanon’s health ministry. A Lebanese security source indicated that at least one senior Hezbollah figure was targeted. Meanwhile, the Houthis in Yemen announced attacks on vessels in the Red Sea and Indian Ocean in solidarity with Palestinians.
Gulf states have reportedly been pressuring Washington to prevent Israel from targeting Iran’s oil facilities. They fear that Tehran’s allies might retaliate against their own oil infrastructure if the conflict escalates further.
Signs of Growing Oil Demand in the U.S. and China
In China, the world’s second-largest oil consumer, a new draft law was published aiming to promote private sector development, a move intended to boost investor confidence amid an economic slowdown. This has raised expectations for increased oil demand in the region.
In the U.S., markets are becoming more optimistic about the Federal Reserve cutting interest rates in November. This follows data showing a rise in weekly jobless claims and an annual inflation rate that is the lowest since February 2021. ING analysts stated in a note that the U.S. jobs data and inflation reports remain conflicting factors for the Fed’s policy direction. However, they expect rate cuts of 25 basis points in both November and December.
The Federal Reserve had aggressively raised interest rates in 2022 and 2023 to combat inflation but began lowering them in September. Lower interest rates reduce borrowing costs for businesses and consumers, which can lead to economic growth and increased oil demand.
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