Oil prices climbed on Wednesday, driven by a reduction in output from a major Libyan oil field and geopolitical tensions in the Middle East.
At 10:25 GMT (12:25 in Paris), the price for a barrel of Brent crude from the North Sea, set for September delivery, rose by 1.27% to $77.45.
Similarly, the American equivalent, West Texas Intermediate (WTI) crude, for the same month’s delivery, increased by 1.19% to $73.20.
Geopolitical Tensions and Supply Disruptions
“The Iranian promise of retaliation against Israel following the assassination of a Hezbollah and Hamas leader, coupled with Libyan protests that led to the partial closure of the Sharara oil field, have been pivotal in supporting crude prices,” stated Tamas Varga, an analyst at PVM Energy.
The National Oil Corporation (NOC) of Libya announced on Tuesday a “partial” suspension of production at the al-Sharara field, operated in partnership with Spanish company Repsol and French company Total, due to protests at the site.
Impact of Libyan Protests
The NOC cited “force majeure” due to a sit-in organized by the Fezzan Movement, a group from southern Libya, leading to the initiation of a production reduction at al-Sharara.
This oil field, located roughly 900 km south of Tripoli, typically produces 315,000 barrels per day, contributing to Libya’s national output of over 1.2 million barrels per day.
Market Reactions
“The production cut at this oil field heightens concerns about supply,” noted John Plassard, an analyst at Mirabaud. Geopolitical events in the Middle East continue to be a focal point for investors, with “suspected attack dates, alarming Western intelligence warnings, and scattered conflicts” in the region, according to analysts from DNB.
Ongoing Conflict in Gaza
The Gaza Strip conflict entered its eleventh month on Wednesday, as Hamas challenges Israel by appointing Yahya Sinwar, one of Israel’s most wanted men, as its leader.
The conflict risks spreading across the Middle East, especially after the assassination of Ismail Haniyeh, attributed to Israel, and Fouad Chokr, Hezbollah’s military chief, killed on July 30 in an Israeli airstrike near Beirut.
Upcoming US Oil Inventory Report
Investors will be keenly observing the weekly report on US oil inventories from the Energy Information Administration (EIA) for the week ending August 2, expected later on Wednesday. Analysts predict a decline in both crude and gasoline stocks.
On Tuesday, however, the American Petroleum Institute (API) reported a slight increase in commercial crude reserves of about 170,000 barrels and a rise in gasoline stocks by over 3.3 million barrels.