Oil prices tick lower; Chinese stimulus could prompt positive week

Investing.com-- Oil prices fell Friday as traders assessed the impact of Hurricane Milton on U.S. oil production amid concerns over supply disruptions in the Middle East.

At 08:50 ET (12:50 GMT), Brent oil futures fell 0.8% to $78.79 a barrel, while West Texas Intermediate crude futures fell 0.8% to $75.27 a barrel. 

Milton hits Florida hard

In the US, Hurricane Milton cut a destructive path across Florida, resulting in a number of fatalities and leaving millions without power.

Authorities warn it could take days to assess the full extent of the damages, but the destruction could dampen fuel consumption in the world's largest oil producer and consumer.

Middle East risk premia

That said, for the week, both benchmarks were headed for gains of around 1%, the second straight positive week, with oil markets remaining supported by concerns over an escalation in Israel's conflicts with both Hamas and Hezbollah. 

Israel launched devastating strikes on Hezbollah targets in Lebanon this week, diminishing the prospect of a ceasefire, even as reports said the military group was seeking a de-escalation. 

Markets fear that an escalation in the conflict could disrupt oil supplies in the Middle East. 

"The market awaits any potential Israeli retaliation against Iran for missile attacks. While the US and other Gulf nations have been pushing for Israel not to target oil infrastructure, this can’t be ruled out completely," said analysts at ING, in a note.

More Chinese stimulus?

The market has also been supported by the potential for more stimulus measures from top oil importer China, after the country's finance minister called a fiscal policy briefing for Saturday.

The markets were mostly underwhelmed by measures unveiled in late-September, but markets are now expecting Beijing to announce 2 trillion to 3 trillion yuan ($280-$420 billion) in new spending.

PPI data lessens impact of consumer prices

Oil prices have pressured by some resilience in the dollar, as hotter-than-expected U.S. consumer price index inflation spurred concerns over a slower pace of interest rate cuts by the Federal Reserve. 

The impact was lessened Friday after US producer prices came in unchanged in September, pointing to a still-favorable inflation outlook and supporting views that the Federal Reserve would cut interest rates again next month.

The prospect of U.S. rates remaining relatively higher for longer pushed up fears that economic activity will be pressured, in turn denting demand in the world’s biggest fuel consumer. 

Data showing a bigger-than-expected build in U.S. inventories furthered concerns over slowing demand, although it had a limited impact on oil prices this week. 

(Ambar Warrick contributed to this article.)