By Scott DiSavino
NEW YORK (Reuters) - Oil prices climbed about 2% on Thursday on a spike in U.S. fuel use before Hurricane Milton barrelled across Florida, Middle East supply risks and signs that demand for energy could grow in the U.S. and China.
Brent futures rose $1.62, or 2.1%, to $78.20 a barrel by 11:26 a.m. EDT (1526 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.48, or 2.0%, to $74.72.
In the U.S., the world's largest oil producer and consumer, Hurricane Milton barrelled across Florida, where about a quarter of fuel stations sold out of gasoline, knocking out power to more than 3.4 million homes and businesses.
"Closures of several product terminals, delayed tanker truck deliveries and disrupted pipeline movement will likely be affecting supplies well into next week given broad based power outages," analysts at energy advisory firm Ritterbusch and Associates said in a note.
"This vast uncertainty across Florida petroleum infrastructure generally has supported gasoline values," Ritterbusch said. U.S. gasoline futures were leading the energy complex higher, trading up about 2.5% on Thursday.
Crude benchmarks spiked earlier this month after Iran launched more than 180 missiles against Israel on Oct. 1, raising the prospect of retaliation against Iranian oil facilities. With Israel yet to respond, crude benchmarks have eased once more and remained relatively flat through the week.
But investors remained wary, given Israeli Defence Minister Yoav Gallant promised that any strike against Iran would be "lethal, precise and surprising".
U.S. President Joe Biden spoke to Israeli Prime Minister Benjamin Netanyahu about Israel's plans concerning Iran, though ANZ analysts said there is growing concern that Israel's allies have little influence on its strategy.
Israeli forces, meanwhile, fired on two positions used by U.N. peacekeepers in southern Lebanon on Thursday and at another one on Wednesday, the U.N. force said, as Israel pressed its assault on Iran-backed Hezbollah and told Lebanese civilians not to return to homes in the south.
Gulf states are lobbying Washington to stop Israel from attacking Iran's oil sites because they are concerned their own oil facilities could come under fire from Tehran's allies if the conflict escalates, three Gulf sources told Reuters.
DEMAND IN THE U.S. AND CHINA
In a move that could boost oil demand in the world's second biggest oil consumer, China published a draft law aimed at promoting the development of the private sector, the country's latest step to boost investor confidence amid an economic slowdown.
In the U.S., markets grew more confident the Federal Reserve would cut interest rates in November after data showed an increase in weekly jobless claims and an annual rise in inflation that was the lowest since February 2021.
"The battle between the U.S. jobs numbers and the inflation data with regards to the outlook for Fed policy remains unresolved ... our base case remains 25 (basis point) rate cuts in November and December," analysts at ING, a bank, said in a note.
After hiking rates aggressively in 2022 and 2023 to tame a surge in inflation, the Fed started to lower interest rates in September.
Lower interest rates decrease borrowing costs for consumers and businesses, which can increase economic growth and demand for oil.