Oil prices climb 2% on Middle East conflict and Libya outage

NEW YORK — Oil prices climbed around 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day’s heavy losses.

Brent crude futures settled $1.47 or 1.9% higher at $77.59 a barrel, while US West Texas Intermediate (WTI) crude ended $1.47 or 2.1% higher at $72.24.

Prices drew support from the closure of Libya’s 300,000 barrels per day (bpd) Sharara oil field, one of its 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 following attacks by Iran-aligned Houthi militants in response to Israel’s war against Hamas. However, the impact on oil tanker movements has been less than expected, according to a Reuters analysis.

Brent and WTI posted 3% and 4% losses, respectively, on Monday after sharp cuts to Saudi Arabia’s official selling prices, prompting both supply and demand concerns.

Oil futures also were also supported on Tuesday after Saudi Arabia emphasized its desire to support efforts to stabilize oil markets and following reports that Russia curbed its crude oil production level in December, said Price Futures Group analyst Phil Flynn.

Russia is part of the OPEC+ group of oil producers that has agreed to cut production by around 2.2 million bpd.

In the US, crude production will hit record highs over the next two years but grow at a slower rate, the Energy Information Administration said, as efficiency gains offset a decline in rig activity. Output will rise by 290,000 bpd to a record 13.21 million bpd this year.

Crude stocks fell by 5.2 million barrels in the week ended Jan. 5, according to market sources citing American Petroleum Institute figures on Tuesday. —