Oil prices rise amid fears of unrest in Libya, tensions in Middle East
Date
8/28/2024 5:01:03 AM
(MENAFN) Oil prices saw a modest increase on Wednesday, recovering slightly from a sharp decline in the previous session that interrupted a three-day streak of gains. Investors are navigating a complex environment marked by conflicting concerns: potential production disruptions in Libya and the Middle East are raising fears of supply shortages, while the outlook for global fuel demand remains clouded by economic uncertainty. By 0209 GMT, brent crude futures had edged up by 25 cents, or 0.31 percent, to USD79.80 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 17 cents, or 0.23 percent, to USD75.70. This rebound comes after a drop of more than 2 percent on Tuesday, which ended a rally of over 7 percent across three consecutive sessions. The decline earlier this week was attributed to concerns over falling refining margins, which have dampened the outlook for global fuel demand amid indications that consumption growth is falling short of this year’s expectations.
Contributing to the current market dynamics are several geopolitical and supply-side factors. On Tuesday, data indicating a decrease in U.S. crude and fuel inventories provided some support to oil prices. However, the most significant concern is the potential loss of oil supply from Libya, where political tensions threaten to halt production. Libya's output, which stands at around 1.2 million barrels per day, could be severely impacted due to a political dispute involving the leadership of the central bank and the management of oil revenues. Oilfield engineers in Libya have reported the halting of production at several fields, including Amal and Nafoora in the southeast, and a reduction in output at the Abu Attifel field in the east. While the internationally recognized government in Tripoli and the National Oil Corporation, which oversees the country’s oil sector, have not confirmed these closures, the uncertainty around Libyan oil production continues to cast a shadow over the market.
Meanwhile, the situation in the Middle East is adding another layer of uncertainty. The ongoing conflict between Israel and Hamas militants in Gaza has yet to see any significant progress toward a ceasefire despite talks in Cairo. The volatility in the region has been exacerbated by recent exchanges of fire between Israeli forces and Hezbollah, an Iranian-backed group, along the Lebanese border. With Iran being a major oil producer, any escalation could disrupt supply channels. Analysts at ANZ have noted that these geopolitical risks continue to weigh heavily on market sentiment, adding to the complexities facing investors who must balance the prospects of both supply constraints and potential weakening of demand.
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