Oil Prices Settle Higher Amid Storm Impact

Oil prices settled higher on Thursday, rebounding after two days of steep losses due to Hurricane Milton disrupting Florida's oil operations, potentially curbing domestic crude supplies.

At 2:30 p.m. ET, West Texas Intermediate crude futures rose 3.6% to settle at $75.85 a barrel, while Brent oil futures increased 3.7% to $79.44 a barrel. Despite this rebound, both contracts have weakened approximately 5% over the past two sessions as demand concerns linger.

Hurricane Milton Hits Florida

Hurricane Milton made landfall in Florida, largely avoiding the Gulf of Mexico's oil infrastructure, but disrupting oil transportation and deliveries. Analysts noted that Chevron shut its fuel-importing terminal at the port of Tampa as a precautionary measure ahead of the hurricane.

Ongoing Middle East Tensions

Tensions persist in the Middle East as hostilities between Israel, Hamas, and Hezbollah continue, marking a year since the war was declared. Fears of a broader war disrupting oil supplies have driven oil prices up recently. Traders are cautious about potential escalations, especially regarding any Israeli strikes on Iranian oil facilities.

Focus on China Stimulus

Markets are now looking for clues regarding potential Chinese stimulus measures, following underwhelming monetary initiatives. Chinese officials plan to hold a press conference on Saturday to discuss fiscal stimulus, which is crucial as China is the world's largest oil importer and seeks to support economic growth.

UBS Predicts Higher Oil Prices

UBS strategists believe ongoing geopolitical risks will sustain a risk premium in the oil market, with prices expected to rise due to modest supply growth. The International Energy Agency (IEA) reported that global oil production only increased by 0.3% from December 2023 to July 2024. The IEA also reduced its 2024 supply growth forecast from 1.8 mbpd to 0.7 mbpd.

For 2025, UBS anticipates subdued U.S. oil output due to lower prices and capital discipline. They remain positive about oil prices, forecasting Brent crude to rise above $80 per barrel in the coming months, supported by demand growth and easing monetary policies from major central banks.