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OIL FUTURES: Crude slips as Hurricane Milton impacts US energy demand
Crude oil futures eased in Asian mid-morning trading on Oct. 11 as energy demand fundamentals in the US were affected by the devastation caused by Hurricane Milton.
At 12:19 pm Singapore time (0419 GMT), the ICE December Brent futures contract fell 27 cents/b (0.34%) from the previous close at $79.13/b, while the NYMEX November light sweet crude contract receded 20 cents/b (0.26%) at $75.65/b.
Hurricane Milton ravaged through Florida, disrupting fuel supply and significantly lowering energy demand in the region.
AccuWeather issued a preliminary estimate that Milton caused total damage and economic losses between $160 billion and $180 billion, calling it “one of the most damaging and impactful storms in Florida history.”
“A $225 billion-$250 billion loss from Helene and another $160 billion-$180 billion from Hurricane Milton totals over $400 billion,” said AccuWeather Founder and Executive Chairman Joel Myers.
“The GDP of the United States is $26 trillion, so this combined loss is nearly 2%, mainly focused in the fourth quarter and the first quarter of 2025. That may wipe out all expected growth in the economy over that period,” Myers added.
Meanwhile, as the market assesses Milton’s economic and infrastructure damage, Chevron began redeploying personnel to its US Gulf of Mexico oil platform, according to company officials.
“Throughout the storm, production from our Chevron-operated Gulf of Mexico assets has remained at normal levels,” Chevron spokesperson Paula Beasley said on Oct. 10.
“At our onshore facilities, we are following our storm preparedness procedures and closely monitoring the forecast and track of the system,” she said.
However, the hurricane disrupted fuel supplies to Florida, which lacks oil refineries. Much of its gasoline, diesel and jet fuel comes from outside the state. Waterborne refined products are regularly delivered to Tampa, where Kinder Morgan operates several terminals.
Further weighing on demand, an appreciating US dollar made dollar-denominated assets like oil more expensive for consumers using foreign currencies.
The ICE US Dollar Index stood at 102.655 at 11:22 am Singapore time (0322 GMT) on Oct. 11 rising 1.71% since the start of the month and higher 0.35% since the start of the week.
However, bearish demand sentiments appear to be short-lived as the US Federal Reserve members continue to voice dovish undertones.
“Fed speakers, including Austan Goolsbee, John Williams and Thomas Barkin, essentially brushed off the hot CPI print, signaling that the central bank is still on track to keep easing — though maybe not at the same breakneck pace.” SPI Asset Management’s Managing Partner Stephen Innes said Oct. 11.
As further interest rate cuts are priced in, the market can hope for a depreciation of the US dollar, which would lead to rising crude demand.
Market awaits further action
Given the uncertainty in the market, traders and analysts are watching for further action that could cause unexpected price upswings.
“Oil markets are likely to remain choppy heading into the weekend amid uncertainty over whether Israel will directly target Iran’s oil industry,” ANZ Research analysts, Brian Martin and Daniel Hynes said in a note drafted early Oct. 11.
Meanwhile, in the world’s largest crude importer, market participants await a speech by China’s Minister of Finance, Lan Fo’an, which will provide insight into the nation’s plans to improve its ailing economy.
“All eyes are now on China’s Finance Minister Lan Fo’an, who is set to speak on Saturday (Oct. 12) about ‘intensifying countercyclical fiscal policy to promote high-quality economic development.’ The next 48 hours could be crucial, especially with rumors of China’s stimulus swirling and traders eagerly awaiting a clear signal to take the next step,” Innes added on Oct. 11.
Dubai swaps
Dubai crude swaps and intermonth spreads recorded gains in mid-morning Asian trade on Oct. 11 from the previous close.
The December Dubai swap was pegged at $76.84/b at 10 am Singapore time (0200 GMT), rising $1.48/b (1.96%) from the Oct. 10 Asian market close.
The November-December Dubai swap intermonth spread inched up 2 cents/b at plus 55 cents/b, at 10 am over the same period and the December-January intermonth spread is pegged at plus 41 cents/b, higher 1 cent/b.
The December Brent/Dubai EFS was pegged at $2.17/b, up 19 cents/b from the previous Asian close.
