Oil costs increase as supply restrictions trump economic worries

Oil prices climbed on Monday as supply worries spurred by a decrease in OPEC production, unrest in Libya, and sanctions against Russia trumped fears of a worldwide recession that would diminish demand.

In June, Euro zone inflation hit an all-time high, boosting the case for rapid rate rises by the European Central Bank, while consumer sentiment in the United States reached an all-time low.

Brent oil rose $2.26, or 2%, to $113.89 a barrel as of 12:47 p.m. ET (1648 GMT), after shedding more than $1 in early trading. The price of U.S. West Texas Intermediate (WTI) crude rose $2.20, or 2%, to $110.63 despite the lack of trading activity over the Fourth of July holiday.

According to a Reuters survey, the Organization of the Petroleum Exporting Countries (OPEC) failed to meet its June goal of increasing production.

Thursday, authorities in OPEC member Libya declared force majeure at the Es Sidr and Ras Lanuf ports and the El Feel oilfield, claiming a reduction of 865,000 barrels per day in oil output (bpd).

Meanwhile, more than two weeks of unrest have caused Ecuador to lose almost 2 million barrels of production, according to Petroecuador, the country's state-owned oil company.

This week, a strike in Norway may restrict supply from the biggest oil producer in Western Europe and reduce overall petroleum production by 8 percent.

"This background of rising supply interruptions clashes with a probable shortage of spare production capacity among Middle Eastern oil producers," said Stephen Brennock of oil trader PVM, referring to the producers' limited ability to pump more oil.

And prices will climb if new oil production does not reach the market shortly.

On Monday, British Prime Minister Boris Johnson asked OPEC+ to raise oil output to tackle the growing cost of living.

As a consequence of Russia's invasion of Ukraine, supply concerns have sent Brent oil prices close to 2008's record high of $147 a barrel.

As a consequence of restrictions on Russian oil and limited gas supplies, surging energy prices have driven inflation in certain countries to multi-decade highs and stoked fears of a recession.