NEW YORK: Oil prices climbed over 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day’s heavy losses.
Brent futures rose $1.90, or 2.5%, to $78.02 a barrel by 11:59 a.m. (1659 GMT). US West Texas Intermediate crude (WTI) rose $1.91, or 2.7%, to $72.68. Both benchmarks were up more than $2 at their session highs.
Prices were supported by the closure of Libya’s 300,000 barrels per day Sharara oilfield, one of Libya’s largest, which has been a frequent target for local and broader political protests, and Middle East tensions.
The Israeli military has said its fight against Hamas will continue through 2024, stoking concerns the conflict could escalate into a regional crisis that disrupts oil supplies.
Meanwhile, some major shipping companies are still avoiding the Red Sea after attacks by Iran-aligned Houthi militants in response to Israel’s war against Hamas.
“The more attractive alternative for (oil tankers) right now is to make a dash for the United States, where crude oil is cheaper than Brent,” said Bob Yawger, director of energy futures at Mizuho. Germany’s Hapag-Lloyd will continue to divert vessels around the Cape of Good Hope, it said on Tuesday.
US Secretary of State Antony Blinken told Israeli leaders there was still a chance of winning acceptance from their Arab neighbours if they create a path to a viable Palestinian state.
Brent and WTI posted 3% and 4% losses respectively on Monday after sharp cuts to Saudi Arabia’s official selling prices (OSP), prompting both supply and demand concerns.
“The question is whether the Saudi move of reducing OSPs to a 27-month low is also a sign of a potential increase in oil supply, implying serious discord within OPEC+,” said PVM analyst Tamas Varga. Saudi Arabia on Tuesday, however, emphasised its desire to support efforts aimed at stabilising oil markets.
The American Petroleum Institute (API), an industry group, will release its weekly oil inventory reports at 4:30 p.m. EST.
US crude stockpiles were expected to have fallen last week, while distillate and gasoline inventories were seen rising, a Reuters poll showed ahead of the API report and government data on Wednesday. Core US inflation data on Thursday will also be in the spotlight.
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