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Oil rises above 3% on Middle East tensions

Oil rose more than three per cent yesterday as tensions mount in the Middle East just as the Organisation of Petroleum Exporting Countries (OPEC) has pledged to remain united in supporting prices.

The West Texas Intermediate contract for February gained $2.41, or 3.5pr cent, to trade at $72.84.

The Brent contract for March added $2.47, or 3.25per cent, to trade at $78.36.

Houthi militants, who are based in Yemen and backed by Iran, claimed that they targeted the CMA CGM Tage container ship. French shipping giant CMA CGM told CNBC in a statement said the vessel “did not suffer any incident.”

This comes a day after Danish shipping giant Maersk halted all shipping through the Red Sea until further notice due to repeated Houthi attacks on vessels.

Protests in Libya have also shut down the Sharara oil field, which produces 300,000 barrels per day (bpd), two engineers told Reuters yesterday.

OPEC and its allies issued a statement pledging to remain united in the group’s “efforts to maintain oil market stability going forward.” Several members of the group pledged in November to cut 2.2 million barrels per day through the first quarter of this year to support prices.

Traders have been skeptical of that pledge because it is voluntary and OPEC has struggled to maintain a united front. The promised voluntary cuts have done little to support prices as the U.S. pumps crude at a record clip and demand weakens in China.

U.S. crude and the global benchmark fell more than 10per cent in 2023 on worries that the market is oversupplied.