Hurricane Milton and Middle East Conflicts Impact Oil Prices

Petroleum Price

• Oil prices steadied in Asian trading on Wednesday as traders weighed uncertainty surrounding developments in the Middle East conflict against continued bearish fundamentals.
• Brent crude futures rose by 11 cents, or 0.14%, to $77.29 a barrel by 02:23 GMT. U.S. West Texas Intermediate futures rose by 3 cents to $73.60 a barrel. MCX crude oil prices opened at 6228, with a fall of 0.26%.

Petroleum Demand and Supply

• The sell-off in the Tuesday session followed a rally that began after Iran launched a missile barrage at Israel on October 1, culminating in an 8% gain for the week on Friday, the largest in over a year.
• Hezbollah officials on Tuesday appeared to back off from a truce in Gaza as a condition for a ceasefire in Lebanon. Hezbollah’s deputy leader, Naim Qassem, said he backed attempts to secure a truce in a televised speech, marking the first time the end of the war in Gaza was not mentioned as a pre-condition.
• Giving a view on demand, data showed U.S. crude oil stocks rose by nearly 11 million barrels last week, much more than analysts polled by Reuters had expected, according to market sources citing American Petroleum Institute figures on Tuesday. However, fuel stockpiles fell.
• Weak demand continued to underpin the fundamental outlook. The U.S. EIA on Tuesday downgraded its 2024 forecast for global oil demand growth by 20,000 barrels per day (bpd), to 103.1 million bpd, due to weaker industrial production and manufacturing growth in the U.S. and China.
• Hurricane Milton, one of the most intense Atlantic hurricanes on record, is expected to make landfall on Florida’s Gulf Coast on Wednesday, potentially disrupting gasoline supply to the third-largest consuming state in the U.S.

Petroleum News

• Crude oil futures ended deeply in the red on Tuesday as supply disruption concerns eased slightly, following reports that Israel is unlikely to attack Iranian oil facilities and will instead focus on Iranian military installations.
• Worries about the Chinese growth outlook and concerns about a demand slowdown hurt as well. China's National Development and Reform Commission pledged more measures to boost the Chinese economy but provided little in the way of details.
• Benchmark crude oil futures for November delivery fell by $3.57, or about 4.63%, settling at $73.57 a barrel on the New York Mercantile Exchange. Brent crude for December delivery dropped by $3.75, or about 4.63%, to settle at $77.18 a barrel on London's Intercontinental Exchange.
• Following the fall, major oil marketing companies like Bharat Petroleum jumped 2.2%, while Hindustan Petroleum surged over 4.5%, trading at ₹409 apiece on the NSE. Indian Oil Corporation shares also traded 1.5% higher on Wednesday morning. On a year-to-date basis, crude oil prices have largely remained stable, with nearly 2% gains in 2024. Brent crude oil prices have also remained within a flat range during the same period.
• Though war-like conditions in the Middle East region remain a key overhang for OMCs, the oversupply situation in the global market is expected to keep oil prices in range.

Expert Opinion

• It is anticipated that additional volatility will occur as the market weighs bearish fundamentals against supply risks due to rising tensions in the Middle East. Meanwhile, support could come as Hurricane Milton intensifies into a Category 5 storm in the U.S. on its way to Florida, after forcing at least one oil and gas platform in the Gulf of Mexico to shut down.
• So far this year, crude oil inventories have slumped by just 5 million barrels since the beginning of the year, according to API data.