Oil Prices Drop Amid Hurricane Milton’s Impact and Middle East Tensions

Oil Prices Dip Amid Hurricane Concerns and Potential Middle East Supply Risks

Oil prices eased slightly on Friday after a significant rally the previous day, but both Brent and U.S. West Texas Intermediate (WTI) crude remain on track for a second consecutive weekly gain. Investors are closely monitoring the potential disruption in U.S. oil demand caused by Hurricane Milton, alongside broader concerns about Middle Eastern supply risks, particularly related to potential Israeli strikes on Iranian oil facilities.

Crude Oil Prices: A Brief Overview

As of 0152 GMT on Friday, Brent crude oil futures fell by 39 cents (0.5%), trading at $79.01 per barrel. U.S. WTI crude futures also dipped 32 cents (0.4%) to $75.53 per barrel. Despite the slight declines, both benchmarks are heading for a weekly gain of 1%-2%.

Hurricane Milton’s Impact on U.S. Oil Demand

Hurricane Milton made landfall in Florida earlier this week, leaving at least 10 people dead and millions without power. The storm’s path of destruction is raising concerns about reduced fuel consumption in certain areas of the United States, the world's largest oil producer and consumer.

"Investors are evaluating how hurricane damage might impact the U.S. economy and fuel demand," said Hiroyuki Kikukawa, president of NS Trading, a division of Nissan Securities.

Geopolitical Tensions: Israel-Iran Oil Conflict

Oil prices are hovering around the 200-day average levels, with Brent at $81.68 per barrel and WTI at $77.36 per barrel. Investors remain cautious, particularly due to rising geopolitical tensions between Israel and Iran. Earlier this month, Iran launched over 180 missiles against Israel, increasing the risk of retaliatory strikes on Iranian oil facilities.

Although Israeli Defense Minister Yoav Gallant has indicated that any response would be "lethal, precise, and surprising," Israel has not yet retaliated. Investors are keeping a close watch on developments, as any escalation could lead to significant disruptions in global oil supplies.

Concerns from Gulf States

Gulf states, which play a crucial role in global oil production, are urging the U.S. to prevent Israel from attacking Iranian oil sites. They fear that if the conflict escalates, their oil facilities could become targets for Iran's regional proxies, including Hezbollah, Hamas, and the Houthis.

Libyan Oil Production Resumes

On the supply front, Libya's National Oil Corporation (NOC) announced that it has restored production levels to around 1.22 million barrels per day, nearing pre-crisis levels. This recovery comes after the recent central bank crisis in the country, and Libya’s return to the oil market could have a stabilizing effect on global oil prices.

Oil Markets Remain Volatile

While the oil market is experiencing some stabilization, ongoing factors such as hurricane-related demand concerns and geopolitical risks in the Middle East could create further volatility. Investors are advised to stay informed about potential disruptions that could impact both supply and demand in the weeks ahead.