Brent Up 1.5% as Oil Prices Rise After Tensions Heat Up in the Red Sea
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Brent Up 1.5% as Oil Prices Rise After Tensions Heat Up in the Red Sea

Oil prices edged higher on Wednesday after production in Libya's largest oil field was halted due to protests.
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The crude oil benchmark rose nearly 1.5% on Wednesday after protesters entered the largest oil field in Libya, ceasing production. The move adds to the supply concerns stemming from the ongoing tensions in the Red Sea, sparking fears over further escalation. 

Protesters Halt Production in Libya’s Top Oil Field 

Oil prices rose on Wednesday as concerns over crude supply worsened after Libya’s largest oil field halted production due to protests.

According to Bloomberg, a group of protesters entered the facility in 20 vehicles, demanding jobs, a new refinery, and other services. The field was producing about 270,000 barrels per day on Tuesday before the protests began. 

Bloomberg reported that the move came not long after Libya’s National Oil Corp. warned that a full halt and a force majeure were likely if the country did not address the protesters’ demands. Force majeure refers to a legal term that allows companies not to meet their contractual obligations amid issues outside their control. 

Brent crude rose more than 1.4% to $77.17 on Wednesday, while West Texas Intermediate (WTI) gained 1.35% to $71.33 a barrel. 

Oil Trending Higher Since Red Sea Attacks; OPEC to Meet in February

The upswing comes after oil prices rose about $2 in the week in the wake of attacks on vessels in the Red Sea launched by Houthi rebels. The US Central Command said on Tuesday they fired two anti-ship ballistic missiles into the sea, but no damage was reported. Further escalation in this region could result in the closure of crucial waterways for oil transportation and the disruption of trade flows. 

Crude oil has been trading in a limited range since the start of 2024 as geopolitical tensions in the Middle East offset persistent economic concerns. Yet, the first trading day of the new year saw the benchmarks decline as immediate worries about the US economy briefly overshadowed fears of heightened tensions in the Red Sea.

“Energy markets were unable to escape the broader pressure seen on risk assets with equity markets also weaker. The weakness in oil comes despite a ratcheting up in tensions in the Middle East.”

said ING analysts Warren Patterson and Ewa Manthey.

Meanwhile, OPEC producers said the organization would meet in February to discuss its ongoing production cut policy. However, ING analysts believe there is little room left for further reductions. 

“Already, the last few rounds of cuts have been driven by voluntary reductions from individual members rather than group wide cuts – a sign that it is becoming more difficult to get all members on board to cut.”

– the analysts wrote.

In the meantime, OANDA analyst Craig Erlam said most of the market’s focus will be on the demand side and whether central banks can deliver the much-discussed soft landing. 

In your opinion, what will dictate the trends in the oil market in 2024? Let us know in the comments below.