Oil climbs as supply concerns deepen with Libyan oilfield disruption

Oil prices rose more than a $1 a barrel on Wednesday after reports of a disruption to Libya’s top oilfield added to supply concerns emanating from tensions in the Red Sea. Brent crude was up $1.34 or 1.8% at $77.23 a barrel within the Nigeria 2024 budget benchmark, while U.S. West Texas Intermediate crude futures rose $1.29 or 1.8% to $71.67 a barrel. Protests have forced a partial reduction in output at Libya’s 300,000 barrel per day Sharara oilfield, two engineers told Reuters. ”The Sharara shutdown certainly adds to pricing upside, especially of Brent,” said Viktor Katona from Kpler, who assessed the disruption as likely short-lived.

Oil prices had climbed around $2 earlier this week after attacks on vessels in the Red Sea by Houthi fighters. The Iran-backed Yemeni group said on Wednesday it had targeted a container ship bound for Israel, a day after the U.S. Central Command (CENTCOM) said the Houthis had fired two anti-ship ballistic missiles in the southern Red Sea. Israeli forces intensified their bombing of the Gaza Strip on Wednesday, after the war stretched into Lebanon with the killing in Beirut of Hamas’ deputy leader. A wider conflict could close crucial waterways for oil transportation and disrupt trade flows. Both oil benchmarks ended Tuesday more than 1% down, as optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Federal Reserve meeting minutes and jobs data on Wednesday.

Meanwhile, expectations of ample oil supply in the first half of 2024 have contained prices ahead of OPEC+plans to hold a meeting of its Joint Ministerial Monitoring Committee (JMMC) in early February. An exact date has not been decided, three sources from the alliance told Reuters. The market’s focus will return to the demand side and whether central banks can deliver the soft landing they have aimed for, said OANDA analyst Craig Erlam. “Any outperformance for the global economy would ease the burden on OPEC+ at a time when compliance with quotas looks like it’s going to be a struggle,” he said. Ahead of weekly U.S. crude and product inventory reports, analysts polled by Reuters expected crude stockpiles fell last week, while distillate and gasoline stocks likely rose.