Traders Give Oil A 3% Boost Over Concerns Of Temporary Oilfield Shutdown

Meanwhile, expectations remain for a drop in interest rates: File Image/Pixabay

The shutdown of a major oilfield in Libya stoked concerns that Middle East tensions could disrupt oil supplies – and as a result oil prices on Wednesday rose by over 3 percent, the first gain of the New Year and in five days.

Brent settled up $2.36, or 3.1 percent, to $78.25 per barrel and West Texas Intermediate settled up $2.32, or 3.3 percent, to $72.70.

However, the temporary closure of the Shahara oilfield, which produces up to 300,000 barrels per day (bpd) was not associated with the geopolitical tensions stemming from the Israel/Hamas war; instead it was caused by protestors demanding paved roads, a clinic, and other services for Libyans.

Oil was also supported by Houthi militants claiming it had “targeted” an Israel-bound container ship in the Red Sea, after firing two anti-ship ballistic missiles in the region.

Judging the current prices for the two key oil benchmarks, Dennis Kissler, senior vice president at BOK Financial, said, “Nobody wants to be short crude below $US70 when there is unrest in the Middle East”; indeed prices have slumped 20 percent since approaching $100 per barrel four months ago.

In other news that may affect trading in the days to come, the U.S. Federal Reserve on Wednesday was scheduled to release the minutes of its December meeting, and while it is expected that interest rates will be kept on hold, traders have reportedly priced in a 65.7 percent chance of a 25 basis point rate cut in March.

Also keenly anticipated is data from the Energy Information Administration, which will its oil inventory report on Thursday; analysts expect a 3 million barrel draw for the week ended Dec. 29, but the American Petroleum Institute on Wednesday offered mixed signals, with a crude draw of 7.4 million barrels and a net build throughout 2023 of just over 13 million barrels.

Also, gasoline inventories according to the API rose this week by 6.9 million barrels as did distillates, after falling in the week prior.