Oil extends gains on Middle East supply worries

Oil prices rose on Thursday, adding to solid gains in the previous session on persisting concerns over Middle Eastern supply following disruptions at a field in Libya and heightened tensions around Israel-Gaza war.

Brent crude rose 53 cents, or 0.7 per cent, to $78.78 a barrel by 0730 GMT, while US West Texas Intermediate crude futures rose 66 cents, or 0.9 per cent, to $73.36.

Both benchmarks rose by around 3 per cent to settle higher for the for the first time in five days on Wednesday, with WTI seeing the biggest daily percentage gain since mid-November.

“A confluence of headlines around further tensions in the Red Sea and a full shutdown of Libya’s Sharara oilfield from local protests have renewed concerns about global oil supply disruptions,” said Yeap Jun Rong, market strategist at IG.

On Wednesday, local protests forced a full shutdown of production at Libya’s Sharara oilfield, which can produce up to 300,000 barrels per day. The field, one of Libya’s largest, has been a frequent target for local and broader political protests.

Earlier on Tuesday, Hamas’ deputy leader was killed in a strike in Beirut – the first strike to hit the Lebanese capital in almost three months of near-daily fire between the Israeli military and Iran-backed Hezbollah that had been confined to the border region.

Shipping concerns in the Red Sea lingered after Yemen’s Iran-backed Houthis said on Wednesday they had “targeted” a container ship bound for Israel. US Central Command said the militant group had fired two anti-ship ballistic missiles in the southern Red Sea the previous day.

The market was also supported by data from the American Petroleum Institute, showing US crude stocks fell by 7.4 million barrels in the week ended Dec. 29, which was double the drawdown that analysts polled by Reuters had expected.

Weekly data from the Energy Information Administration, the statistical arm of the US Department of Energy, is due at 11:00 a.m. (1600 GMT) on Thursday, delayed by a day due to the New Year’s holiday on Monday.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday that cooperation and dialogue within the wider OPEC+ producer alliance will continue, after OPEC member Angola said it would leave the bloc last month.

A meeting of the group has been announced for Feb. 1 to review the implementation of its latest oil output cut.

Analysts at Goldman Sachs expect Brent to range between $70 and $90 a barrel in 2024 based on flexible OPEC+ supply, a low risk of recession and opportunistic strategic petroleum reserve purchases by China and the US.

Geopolitical risk scenarios will remain a key upside risk to the forecast, the analysts added in a Jan. 3 client note.