DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude traded on the Intercontinental Exchange advanced more than 3% Wednesday on a combination of a supply disruption at Libya's largest oil field, El Sharara, following a series of antigovernment protests and explosions near Iranian General Qasem Soleimani's tomb that could further ratchet up geopolitical tensions in the Middle East.

More than 100 people died from twin explosions Wednesday near the Iranian city of Kerman in Iran's deadliest terrorist attack in nearly four decades. No group has claimed responsibility for the attack, but it is clear the perpetrators targeted a memorial service for Soleimani who was killed in a U.S. drone attack in 2020. Soleimani was considered the second-in-command in Iran, the most powerful figure in the Islamic Republic after the regime's supreme leader, Ayatollah Ali Khamenei.

The attack stands to further destabilize the volatile region rocked by the Hamas-Israeli war, attacks by the Houthi militia against commercial vessels in the Red Sea and violence in Iraq, Syria, and this week, in Bierut, Lebanon.

On Tuesday, Iran dispatched a warship into the Red Sea, emboldening Houthi militias that ambushed at least 24 commercial ships since October following the start of the Hamas-Israeli war. In response to the escalating violence, some of the world's largest shipping firms have refused to travel through the Suez Canal, complicating trade flows between Europe and Asia and forcing some vessels to take a more costly and time-consuming route around the Cape of Good Hope.

Lending further support for oil futures, antigovernment protests in southern Libya shuttered the country's largest oil field, El Sharara, removing some 300,000 barrels per day from the global oil market. Media outlets further reported that nearby El-Feel oil field with a daily production capacity of 70,000 bpd has also been shut-in. Both fields are in the Murzuq Basin in southern Libya and jointly operated by Libya's state-owned company NOC, Spain's Repsol, France's Total, Austria's OMV and Norway's Equinor. Libya's oil fields and infrastructure have been frequently targeted by protestors and rival militias since the fall of Moammar Qadhafi in 2011.

Also on Wednesday, traders awaited the release of the inventory survey from the American Petroleum Institute, delayed one day due to the New Year's Day holiday. Consensus of analysts and traders surveyed by the Wall Street Journal call for commercial crude stockpiles to have declined 2.7 million barrels (bbl) during the final week of December. Gasoline inventories are expected to have increased by 400,000 bbl, while stocks of distillates, mostly diesel fuel, are seen to have risen by 400,000 bbl. Refinery capacity use likely slipped by a fifth of a percentage point to 93.1%. Estimates range from a 0.5% increase to a 1.5% drop.

At settlement, ICE March Brent futures advanced $2.36 to $78.25 bb and NYMEX February West Texas Intermediate futures rallied to $72.70 bbl, up $2.32. NYMEX February ULSD futures gained $0.0786 to $2.6044 gallon, while NYMEX February RBOB futures advanced $0.0632 to $2.1581 gallon.

Liubov Georges can be reached at Liubov.Georges@dtn.com