Oil prices rose on Thursday as a result of production interruptions in Libya and rising Middle East tensions following the killing of a top Hamas official in Beirut.
Libya has been forced to shut down its largest oil production, Sharara, in North Africa after demonstrators infiltrated the facility, which was producing over 270 million barrels per day prior to the shutdown.
Since the beginning of the year, crude oil prices have been rising. Oil prices rose Tuesday as tensions in the Middle East remained high. International benchmark crude Brent traded at $78.77 per barrel, up 0.66% from the previous trading session’s close of $78.25 per barrel on Wednesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $73.36 per barrel, up 0.90% from Wednesday’s close of $72.70 per barrel. Price upticks were spurred by the suspension of almost 300,000 barrels of oil per day after protesters in Libya shut down both El-Feel, a nearby oil facility, and Sharara, country’s largest oil field, due to high fuel prices and a lack of job opportunities in the country.
Rising tension in the Middle East further fueled prices after Hamas’ Political Bureau Deputy Chairman Saleh al-Arouri and six others were killed Tuesday in an Israeli drone attack in the Dahieh district of Beirut, referred to as Hezbollah’s stronghold.
Strong demand expectations in the US, the world’s largest oil consuming country, also supported further price increases as the American Petroleum Institute (API) late Wednesday announced an estimated decrease of 7.4 million barrels in US crude oil inventories, against market expectation of a draw of 2.9 million barrels.
The US Energy Information Administration (EIA) will release official data on oil stocks later on Thursday, and if the large stock decline is confirmed, prices could rise further.
Further tension in the Middle East pushed oil prices higher yesterday. ICE Brent managed to settle a little more than 3.1% higher on the day.
Two car bomb explosions at a memorial for Qassem Soleimani (a senior Iranian general who was killed in a US airstrike in Iraq in 2020) left nearly 100 people dead. While it is not clear who was behind the attack, it only adds to the growing tensions in the region.
Preliminary production numbers for OPEC are starting to come through. Bloomberg’s survey shows that the group’s output fell by a marginal 40 Mbbls/d MoM to 28.05 Mbbls/d in December.
Nigeria saw the largest increase over the month, growing by 50Mbbls/d, whilst the UAE saw the largest decline, falling by 70Mbbls/d. Given that some OPEC+ members agreed on additional voluntarily cuts of almost 900Mbbls/d for 1Q24, OPEC output will edge lower this month.
The US Department of Energy announced yesterday that it is looking to buy up to 3MMbbls of sour crude oil for the Strategic Petroleum Reserve (SPR) for delivery in April. This is part of the US government’s continued effort to refill the SPR after releasing 180MMbbls from it in 2022. Naira Lost 11% as Banks Issue New Update on FX Spending
API numbers released overnight were rather mixed. US crude oil inventories fell by 7.42MMbbls over the week, which is constructive. However, this was more than offset by large product builds. Gasoline and distillate stocks grew by 6.91MMbbls and 6.69MMbbls respectively.
