LONDON (Reuters) - Oil rose on Wednesday for a second day of gains, as Middle East supply concerns arising from the Israel-Hamas war and the shutdown of a top Libyan oilfield offset rising U.S. output and worries about weak economic growth.
While the Organization of the Petroleum Exporting Countries and allies are cutting production to bolster the market, U.S. crude production will hit a record high in 2024, the Energy Information Administration said on Tuesday.
Brent crude futures were up 38 cents, or 0.5%, to $77.97 per barrel at 1259 GMT, after earlier falling as low as $77.00. U.S. West Texas Intermediate crude futures added 32 cents, or 0.4%, to $72.56.
“The first few weeks of trading in a new calendar year often produces this kind of choppy price action,” said Ole Hansen of Saxo Bank.
“While supply disruptions remain an unrealised threat, the physical market is showing signs of actual weakness, basically reducing the geopolitical risk impact,” he added.
Europe’s weak economic outlook weighed on the demand outlook. The euro zone may have been in recession last quarter and prospects remain weak, European Central Bank Vice President Luis de Guindos said on Wednesday.
Crude on Tuesday gained about 2% after losses on Monday of more than 3%. On Sunday Libya’s National Oil Corporation (NOC) declared force majeure at its Sharara oilfield, which can produce up to 300,000 barrels per day.
“It would appear the market is well supplied at the moment which is keeping prices near the recent lows,” said Craig Erlam, analyst at brokerage OANDA. “Nothing we’ve seen in recent weeks changes that, which is why markets have been choppy but ultimately not moved very far.”
A report on Tuesday from industry group the American Petroleum Institute showed a bigger-than-expected drop in crude inventories in the world’s biggest oil consumer, but this was offset by rising supplies of refined products.