Crude oil futures rose for a third day after prospects for a truce in the Israel-Hamas war seemed to diminish and as slowing U.S. production eased worries that the market is oversupplied.
The West Texas Intermediate contract for March added 55 cents, or 0.75%, to settle at $73.86 a barrel Wednesday, while the Brent contract for April gained 62 cents, or 0.79%, to settle at $79.21 a barrel.
Israel Prime Minister Benjamin Netanyahu on Wednesday rejected a proposal made by Hamas for a permanent ceasefire, vowing to fight on in Gaza until "absolute victory."
Netanyahu's comments came shortly after he met with U.S. Secretary of State Antony Blinken, who is trying to facilitate truce in Gaza in exchange for the release of hostages.
"While there are some clear nonstarters in Hamas' response, we do think it creates space for agreement to be reached and we will work at that relentlessly until we get there," Blinken told reporters at press conference in Israel.
The war between Israel and Hamas threatens to draw the U.S. into a direct confrontation with Iran. The U.S. launched airstrikes against Iranian forces and allied militants in Iraq and Syria last weekend in retaliation for the death of three American troops in a drone strike in Jordan.
Analysts have warned that a confrontation between the U.S. and Iran could impact the oil market if there is a prolonged disruption in the Strait of Hormuz, a crucial route for crude flows.
In additional to geopolitical risks, oil prices also found support from forecasts that U.S. production will grow more slowly this year than expected.
The U.S. pumped a record 13.3 million barrels per day of crude oil in December, but output is not expected to surpass this level until early 2025, according to estimates from the Energy Information Administration, an arm of the Department of Energy.
On balance, domestic oil output is expected to grow by 170,000 barrels per day this year, down significantly from the EIA's previous forecast of 290,000 bpd. Crude production fell in January due to weather and is forecast to rebound in February before easing slightly through the middle of the year, the EIA said.
U.S. oil output has raised worries among traders that the market is oversupplied as China's economy and crude demand softens. But the world will face a crude oil supply deficit of 120,000 barrels per day this year, according to EIA estimates.
Occidental Petroleum CEO Vicki Hollub told CNBC this week that although the market is currently oversupplied, the world will face a major shortage by the end of 2025 because crude reserves aren't being replaced fast enough.
"We're going to be in a situation now where in a couple of years' time we're going to be very short supply," Hollub told CNBC.
Correction: U.S. oil data is from the Energy Information Administration. An earlier version misstated the agency's name.
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