SINGAPORE: Oil prices climbed on Thursday, driven by a surge in fuel demand as a significant storm battered Florida and worries about potential supply disruptions in the Middle East due to escalating tensions between Israel and major oil producer Iran.
Brent crude futures increased by 24 cents, or 0.3 percent, reaching $76.82 a barrel, while US West Texas Intermediate futures rose 28 cents, or 0.4 percent, to $73.52 a barrel at 9:55 a.m. Saudi time.
The world's largest oil producer and consumer has faced a second major storm, Hurricane Milton, which made landfall on Florida's west coast, causing tornadoes and threatening seawater surges. This storm has already heightened demand for gasoline in the state, with approximately a quarter of fuel stations running out of supplies, thereby supporting crude prices.
Additionally, prices were bolstered by investors' concerns over rising tensions between Israel and Iran. Israeli Defense Minister Yoav Gallant warned that an Israeli strike against Iran would be "lethal, precise, and surprising."
US President Joe Biden discussed Israel's plans regarding Iran with Prime Minister Benjamin Netanyahu in a 30-minute call on Wednesday, described by the White House as "direct and very productive." Biden continues to discourage Israel from targeting oil facilities, but there is increasing concern that Israel's allies have limited influence over its strategy, according to ANZ analysts.
Despite the threats to the oil-producing Middle Eastern region, demand concerns continue to shape the fundamental outlook. The US Energy Information Administration (EIA) on Tuesday revised down its demand forecast for 2025 due to weakening economic activity in China and North America.
EIA data on Wednesday revealed that crude inventories surged by 5.8 million barrels to 422.7 million barrels last week, exceeding analysts' expectations polled by Reuters. However, this was much lower than the American Petroleum Institute's industry group's estimate on Tuesday.
Nonetheless, oil demand has risen this month, according to JPMorgan analysts, supporting prices. "In the US, gasoline demand jumped by 800 kbd week over week. Across Asia, flight activity recovered after being disrupted by multiple typhoons. In China, daily flight activity reached an eight-week high," the analysts noted.
"With most travel-related demand now behind us, attention turns to the upcoming weather-driven increase in demand in the coming weeks."
