Global oil prices continue upward trajectory on supply disruptions

January 04, 2024 (MLN): Global oil prices rose on Thursday, extending gains from the previous session due to heightened supply concerns driven by disruptions at a field in Libya and escalating tensions surrounding the Israel-Gaza war.

Brent crude is currently trading at $78.61 per barrel, reflecting a gain of 0.47% on the day.

While West Texas Intermediate crude (WTI) is trading at $73.34 per barrel, up by 0.49% compared to the previous close.

The commodity snapped its four-day losing streak by surging over 3% in the previous session as the market weighed possible supply disruptions.

This marked the highest 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, as Reuters reported.

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.

Shipping concerns in the Red Sea entered after Yemen's Iran-backed Houthis said on Wednesday they had "targeted" a container ship bound for Israel. U.S. 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 U.S. crude stocks fell by 7.4 million barrels in the week ended December 29.

Weekly data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due 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 February 01 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 U.S.

Geopolitical risk scenarios will remain a key upside risk to the forecast, the analysts added in a January 03 client note.

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