Oil Prices Rise Amid Middle East Tensions and Hurricane-Driven Fuel Demand

Petroleum Price

• Oil prices rose in early Asian trade on Thursday due to concerns about potential supply disruptions in the Middle East, as Israel plans to strike oil-producer Iran, and due to increased fuel demand as a major storm approached Florida.
• Brent crude futures rose 37 cents, or 0.5%, to $76.95 a barrel, while U.S. West Texas Intermediate futures increased 35 cents, also 0.5%, to $73.59 a barrel at 0034 GMT. MCX crude oil prices opened at 6,210, gaining 1.49%.

Petroleum Demand and Supply

• Market participants feel there could be an escalation in tensions in West Asia following recent developments. As reported earlier, Iran launched a missile attack on Israel last week, and Israel vowed to retaliate. A Reuters report, quoting Israel's Defense Minister Yoav Gallant, stated that Israel’s attack on Iran would be "lethal, precise, and surprising."
• Any escalation in tensions could impact crude oil supplies from the region, as Iran is a major oil producer.
• Meanwhile, Hurricane Milton has been affecting fuel supplies in the U.S., having already made landfall on Florida’s west coast. This has increased demand for gasoline in Florida, where many fuel stations are running out of stock, supporting crude oil prices.
• Further increases in crude oil prices were limited, as the latest data showed a rise in U.S. crude oil inventories for the week ending October 4.

Petroleum News

• According to the U.S. Energy Information Administration (EIA), U.S. commercial crude oil inventories increased by 5.8 million barrels for the week ending October 4. At 422.7 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year. The market was expecting inventories to increase by around 2 million barrels for the same period.
• Total motor gasoline inventories decreased by 6.3 million barrels and are about 4% below the five-year average for this time of year.
• Total products supplied in the U.S. over the last four weeks averaged 20.6 million barrels a day, up 2.9% from the same period last year. Motor gasoline product supplied averaged 9 million barrels a day over the past four weeks, up 7.5% from the same period last year.
• Crude oil prices dropped by 2% to settle at 6,119, as supply disruption concerns eased following reports that Israel is unlikely to target Iranian oil facilities, focusing instead on military installations.
• Concerns about Chinese economic growth and a potential demand slowdown also weighed on prices. China's National Development and Reform Commission pledged to implement measures to support the economy, but the lack of concrete details disappointed the market, especially given China’s ongoing housing crisis, weak consumption, and rising local government debt.
• Goldman Sachs reported a slight decrease in geopolitical risk premiums in the oil market, following last week's sharp rise.

Expert Opinion

• Crude oil is experiencing long liquidation, with open interest down by 2.41% to settle at 11,949 contracts, while prices dropped by 125 rupees. Crude oil has support at 6,002, with the potential to test 5,885 if breached.
• Resistance is seen at 6,246, and a break above that level could push prices to test 6,373. Additionally, ongoing geopolitical uncertainty continues to contribute to heightened volatility in the oil market, further intensified by expectations of potential easing in the Middle East crisis.