© Reuters.
Investing.com–Oil prices edged higher in Asian trading on Thursday, extending strong gains from the previous session as the closure of Libya’s biggest oil field fueled more concerns about tight supplies .
The closure came amid continued disruptions to maritime activity in the Red Sea, which markets feared could disrupt global oil supplies. The war between Israel and Hamas now appears to have spread to Lebanon, marking an escalation of the conflict.
Crude supply disruptions in the Middle East have been a key element of support for oil prices in recent sessions, particularly on the grounds that they could lead to a tightening of global oil markets in 2024.
Expectations of tighter supplies were further fueled by industry data showing a much larger-than-expected drawdown in U.S. inventories in the final week of 2023. But the data also showed an outsized buildup of gasoline and distillate stocks, indicating that U.S. fuel demand remained weak. .
expiring in March rose 0.3% to $78.47 per barrel, while it rose 0.5% to $73.20 per barrel as of 8:10 p.m. ET (01:10 GMT).
Both contracts jumped about 3% on Wednesday, following news of Libya’s shutdown. Protests over high fuel prices have halted production at Libya’s El Sahara oil field, which produces around 300,000 barrels per day.
U.S. Stockpiles Fall More Than Expected, But Fuel Demand Looks Weak-API
Data from the American Petroleum Institute (API) showed that the United States fell by 7.4 million barrels in the week to December 29, far more than expectations of a drop of around 3 million barrels.
But API data also showed a buildup of more than 6 million barrels of gasoline and distillate inventories, suggesting demand for the world’s largest fuel consumer remained weak through the end of 2023 .
Although much of this slowdown can be attributed to weak seasonal trends, particularly the winter season which deters road travel, the combination of high interest rates and slowing economic activity could also weigh on demand fuel.
API data typically reports a similar reading of , which is expected later Thursday.
Despite strong gains on Wednesday, oil prices still suffered heavy losses in 2023 and WTI has lost more than 10% each over the past year due to growing fears of a slowdown in demand, particularly in due to the economic pressure exerted by high interest rates.
Purchasing Managers’ Index (PMI) data released on Wednesday showed a sustained contraction in the United States. Crude prices also marked a weak start to 2024 following dismal PMI data from major importer China.
Despite Wednesday’s rebound, oil’s further gains were held back by a strong rally in , as markets awaited new cues on monetary policy from data expected this Friday. Some doubts about the timing of US interest rate setting also seemed to seep into the markets, without providing any clues.
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