Oil prices rose Tuesday as U.S. crude production is expected to plateau this year after setting a record in 2023.
The West Texas Intermediate contract for March added 53 cents, or 0.73%, to settle at $73.31 a barrel. The Brent contract for April was settled at $78.59 a barrel, up 60 cents, or 0.77%. U.S. crude and the global benchmark have risen 2.32% and 2.01%, respectively, for the year.
U.S. crude output set a record of 13.3 million barrels per day in December before pulling back to 12.6 million bpd in January due to winter storms, according to estimates from the Energy Information Administration released Tuesday.
Domestic production will briefly return 13.3 million bpd in February but then decline through the middle of the year, according to the EIA. The U.S. will not exceed the production record of 13.3 million bpd until February 2025.
U.S. crude production has weighed on oil prices for months as traders worry that that the market is oversupplied amid a faltering economy in China.
Oil traders were also monitoring efforts to negotiate a truce in Gaza and looking for signs of further U.S. military action in the Middle East.
U.S. Secretary of State Antony Blinken is visiting Egypt on Tuesday after meeting with the Saudi Crown Prince on Monday. Blinken is consulting with allies in the region in an effort to secure a truce in Gaza and prevent the war from spilling over into a broader regional conflict.
Blinken's trip to the region comes after the U.S. again launched airstrikes against Iranian forces and allied militants in Iraq, Syria and Yemen over the weekend. The strikes came in response to the deaths of three U.S. troops in a drone attack in Jordan carried out by Iran-allied militants.
White House National Security Advisor Jake Sullivan said on Sunday that the U.S. will take additional, "further action" after the latest weekend strikes.
Tamas Varga, an analyst with oil broker PVM, said geopolitical tensions are keeping a floor under oil prices as expectations for rapid interest rate cuts in the U.S. diminish and the strength of China's economy remains a concern.
"The false prophecy of ostensible truce between Israel and Hamas has been followed by intense U.S. and UK strikes against Iranian-backed militant groups in Iraq and Syria and by attacks on Houthi groups in Yemen," Varga wrote in a Tuesday note.
"The heightened tension will undoubtedly entail renewed Houthi hostilities in the Red Sea ensuring persistent re-routing of oil traffic around the Cape of Good Hope," Varga wrote.
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This article has been updated to correct the name of the Energy Information Administration.