Oil prices have recovered as Hurricane Milton strikes Florida, while tensions in the Middle East continue to linger
Oil prices increased on Thursday, recovering after two consecutive days of significant losses, as attention remains on the ongoing conflict in the Middle East and Hurricane Milton making landfall in Florida.
Brent oil futures rose by 1.2% to $77.46 per barrel, while West Texas Intermediate crude futures also climbed 1.2% to $74.14 per barrel.
Both contracts have seen a decline of around 5% over the past two sessions, with ongoing concerns about demand continuing to shape the market outlook.
Hurricane Milton Impacts Florida
In the U.S., Hurricane Milton has hit Florida, and although the storm largely spared the oil infrastructure in the Gulf of Mexico, it has already led to increased gasoline demand in the state, providing some support to crude prices. Analysts at ING noted that Chevron shut its fuel-importing terminal at Tampa as a precautionary measure ahead of the hurricane, curtailing production.
Continued Middle East Tensions
The conflict between Israel, Hamas, and Hezbollah remains ongoing, marking a year since the war began. Earlier in the week, reports of Hezbollah seeking a ceasefire caused some turbulence in the oil markets, though tangible dialogue has been scarce. Concerns over potential disruptions to oil supplies due to an escalation in the conflict, especially if Israel attacks Iran’s oil facilities, have been a significant driver of oil prices in the past week following an Iranian strike on Israel.
Focus on Chinese Stimulus
Markets are also looking for further indications of stimulus measures from China, which has not met expectations with its recent monetary policies. Chinese officials are set to hold a press conference this Saturday to outline additional fiscal stimulus plans, as the country, the world’s largest oil importer, struggles with economic growth.
UBS Optimistic About Oil Prices
UBS strategists anticipate that ongoing geopolitical risks will maintain a risk premium in the oil market, while fundamental factors are expected to support rising oil prices in the months ahead. They noted that supply growth remains modest, contributing to a market deficit. According to the International Energy Agency (IEA), global oil production increased by only 0.3% between December 2023 and July 2024, with the 2024 supply growth estimate revised downward from 1.8 million barrels per day to 0.7 million barrels per day.
UBS forecasts a continuation of subdued U.S. oil output in 2025 due to lower prices, uncertainty regarding OPEC+ production, and a focus on capital discipline. Despite challenges, UBS remains positive about oil prices, predicting that Brent crude will surpass $80 per barrel in the coming months.
