Yahoo Finance Oil prices jump 2% amid rising Middle East tensions, easing oversupply worries
Oil jumped more than 2% Thursday as Middle East tensions kept traders on edge and US production forecasts signaled tighter-than-anticipated supply for 2024.
The US killed the commander of an Iran-backed militia and Israel rejected a Hamas ceasefire proposal, indicating no clear end date to the conflict in the region.
West Texas intermediate (CL=F) jumped to above $75 per barrel, while Brent futures (BZ=F) rose to hover just north of $80 per barrel midday.
The developments come as Houthi rebels in support of Palestinians have been targeting vessels, prompting major shipment companies and tankers to avoid the Red Sea region that connects to the Suez canal, a critical pathway between Asia and Europe.
"The geopolitical Red Sea risk is returning to crude," said Dennis Kissler, senior vice president at BOK Financial.
Separately, concerns related to an oversupply of crude eased this week after the Energy Information Administration reduced its US output forecast well below the record levels of December 2023.
"We forecast production will return to almost 13.3 million barrels per day in February but then decrease slightly through the middle of 2024 and will not exceed the December 2023 record until February 2025," said the EIA this week.
Traders are also focused on the latest draws in both distillates, which includes diesel fuels, and gasoline inventories.
"The sharp draw to fuels is pointing to higher demand," said Kissler. The analyst also mentioned overall supplies for crude, distillates, and gasoline have been sitting below their five-year averages.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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