Oil nudged higher as twin incidents in the Middle East underlined the region’s rapidly escalating tensions, which have already snarled global shipping and carry the potential for interruptions to crude production.

Brent crude rose above US$78 a barrel. In Yemen, the U.S. struck more than a dozen Houthi missile launchers in its latest response to the Tehran-backed group’s repeated attacks on shipping. Elsewhere, Pakistan carried out retaliatory strikes in Iran.

Still, crude has seen a relatively muted reaction to growing tensions in the Middle East. The International Energy Agency said global oil markets are likely to remain reasonably well supplied this year.

Despite the lack of activity in headline prices over recent days — Brent futures have traded in a six dollar band so far this year — there have been some bigger moves elsewhere. Key timespreads in the U.S. surged on Wednesday as a chunk of domestic production was curtailed by cold weather.

Crude oil has spent the opening weeks of the year looking for direction, as the escalating crisis in the Middle East and bets the U.S. Federal Reserve will start cutting interest rates later than had been expected have collectively pushed and pulled prices. Traders are also gauging the impact of supply cuts from the Organization of Petroleum Exporting Countries and its allies.

“The oil market does seem to have a general air of acceptance as to its current predicament of being boxed in,” said Tamas Varga, an analyst at brokerage PVM. “Until our current influences become more acute in nature, oil will continue its left-to-right chart movement and remain rangebound.”

The industry-backed American Petroleum Institute, meanwhile, reported a small increase in nationwide U.S. crude inventories but a decline at the key Cushing, Oklahoma, hub. At the same time, it flagged increases in gasoline and distillate stockpiles. Official figures will be issued later on Thursday.

Prices:

  • Brent for March settlement traded 0.5 per cent higher at $78.24 a barrel at 10:19 a.m. in London.
  • WTI for February delivery added 0.7 per cent to $73.07 a barrel