Global oil prices rose for a second day above $78 (R1454) per barrel after an industry report showed a bigger-than-expected drawdown of crude inventories in the US that bolstered demand sentiment.
Industry data showed that US crude inventories declined by 5.2 million barrels last week, way above market expectations for a 1.2 million barrel drop.
Additionally, escalating geopolitical tensions in the Middle East and a halt in oil production in Libya heightened concerns.
Brent crude oil rose by 1.3% yesterday to $78.60 per barrel, also pushed higher by escalating geopolitical tensions in the Middle East while halted oil production in Libya continued to support oil prices.
Libya's Sharara oilfield has stopped production due to political protests, resulting in the elimination of roughly 300 000 barrels per day from the market.
The extended conflict in Gaza and Houthi attacks on Red Sea vessels further increased fears of a broader regional conflict that could disrupt supply.
Reports indicated that renewed attacks on shipping in the Red Sea by Yemen's Houthi militia in support of the Palestinians on Tuesday and potential disruptions to oil tanker flows in the area also supported prices.
“Oil continues to recover from the Saudi price cut losses as the Middle East conflict and disruption to Libyan supply provide some support to the price,” said Andre Cilliers, a currency strategist at TreasuryONE.
“Brent crude is up nearly 2.4% from yesterday's opening level as it trades just below the $78.00 mark.”
Even though oil prices have been well-behaved with Brent crude largely unchanged at just under $80 per barrel, a spike in oil prices would push the global economy in a stagflationary direction.