Global oil prices surge amid supply disruptions

Global oil prices

WEB DESK: In response to the recent Middle East crisis and a Libyan supply outage, oil prices experienced a notable surge on Tuesday, rebounding from the previous day’s substantial losses.

Brent crude futures saw an increase of $1.07, equivalent to 1.41 per cent, reaching $77.19 per barrel by 1515 GMT. Simultaneously, US West Texas Intermediate crude futures rose by $1.12, representing a 1.58 per cent gain, reaching $71.89.

Although both benchmarks initially peaked with gains exceeding $2 per barrel during intra-day trading, prices have since moderated. Suvro Sarkar, the energy sector team lead at DBS Bank, noted, “On the supply side, there are some bullish factors from the closure of Libya’s largest oilfield, which has affected around 0.3 million barrels per day of oil production.”

In the Middle East, major shipping companies remain cautious, avoiding the Red Sea after attacks by Iran-aligned Houthi forces in response to Israel’s conflict with Hamas. Hapag-Lloyd, a German shipping company, announced its decision to continue diverting vessels around the Cape of Good Hope.

Concerns are mounting as the Israeli military asserts that its fight against Hamas will extend through 2024, raising worries in markets about the potential for the conflict to escalate into a regional crisis, disrupting oil supplies in the Middle East.

US Secretary of State Antony Blinken conveyed to Israeli leaders the possibility of winning acceptance from Arab neighbours by establishing a path to a viable Palestinian state.

The oil market faced challenges on Monday, with Brent and WTI experiencing 3 per cent and 4 per cent losses, respectively, following significant cuts to Saudi Arabia’s official selling prices (OSP). This prompted concerns about both supply and demand.

Tamas Varga, an analyst at PVM, raised questions about the Saudi move, stating, “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+.”

Saudi Arabia, however, emphasised its commitment to supporting efforts aimed at stabilising oil markets on Tuesday. Carsten Fritsch, an analyst at Commerzbank, interpreted the OSP cut as an indication of “a weakening of demand for oil in the three most important demand regions.”

In addition to these developments, German industrial production unexpectedly fell in November for the sixth consecutive month, according to the federal statistics office.

Investors are now eagerly awaiting US inventory data from the American Petroleum Institute later on Tuesday, with core US inflation data on Thursday also poised to be in the spotlight.

Read next: Protesters call for ceasefire as President Biden addresses Israel-Hamas conflict

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