Oil Prices Settle Lower Despite Supply Concerns

Oil prices ended lower on Friday amid concerns surrounding Hurricane Milton and ongoing Middle East tensions affecting U.S. oil production.

At 2:30 p.m. ET (1830 GMT), Brent oil futures decreased by 0.5%, settling at $79.04 a barrel, while West Texas Intermediate crude dropped by 0.4%, closing at $75.56 a barrel.

Milton Hits Florida Hard

Hurricane Milton has wreaked havoc in Florida, causing several fatalities and leaving millions without power. Authorities estimate that it may take days to fully assess the damage, which could lead to a reduction in fuel consumption from the world’s largest oil producer and consumer.

Middle East Risk Premia

Despite the drop, both Brent and WTI benchmarks are projected for gains around 1% this week, marking the second consecutive positive week for oil markets. This trend is largely driven by fears of escalating conflict in the Middle East, particularly between Israel and Hezbollah, which could disrupt oil supplies. Recent airstrikes by Israel on Hezbollah targets in Lebanon have diminished hopes for a ceasefire.

According to analysts at ING, the market is cautious about potential Israeli retaliation against Iran following missile attacks, although the U.S. and Gulf nations are lobbying for no strikes on oil infrastructure.

In the latest data, Baker Hughes reported a two-rig increase in the U.S. oil rig count, bringing the total to 481.

More Chinese Stimulus?

The market also hopes for additional stimulus measures from China, the largest oil importer, after a briefing scheduled by the finance minister for Saturday. Although recent stimulus measures disappointed, there are expectations of 2 trillion to 3 trillion yuan ($280-$420 billion) in new spending to be announced.

PPI Data Lessens Impact of Consumer Prices

Oil prices have been affected by a stronger dollar and rising concerns about U.S. inflation, which could slow down interest rate cuts by the Federal Reserve. However, U.S. producer prices remained stable in September, easing some inflation fears and suggesting potential rate cuts next month.

Nevertheless, the expectation of sustained higher U.S. interest rates raises concerns over economic activity and a potential dip in demand. A larger-than-anticipated increase in U.S. inventories further compounds demand concerns, although it had a minimal short-term effect on oil prices this week.

_(Peter Nurse, Ambar Warrick contributed to this article.)