Oil Prices Surge More Than 3% on Libya Crude Production Glitch

Oil prices have been quite volatile recently, surging $10 higher and reversing lower, while in the last few days, we’re seeing another surge, with WTI crude trading at $77.50s. This time the bullish momentum is being driven by tensions, as Libya announces a reduction of Oil production and exports due to disputes among different political fractions, while the recent Israel-Lebanon tensions have also played their part.

WTI Crude Oil Chart Daily – Bouncing $5 Off the Support

WTI Crude Price Action and Oil Market Influences

Earlier this month, WTI crude oil prices fell to their lowest level of the year due to a global market sell-off. However, escalating tensions in the Middle East provided some support for oil prices, as concerns over potential disruptions in oil supply caused WTI to increase by $6 in less than a week, bringing it closer to $80 per barrel. This increase was short-lived, and WTI prices fell below $73 once again.

Impact of Geopolitical Tensions on Oil Prices

Despite the brief drop, buyers have returned to the market, driven by ongoing tensions in the Middle East and North Africa. An incident last week where the Greek-flagged oil tanker, Sounion, carrying 150,000 tonnes of crude oil, was attacked in the Red Sea near Yemen’s port city of Hodeidah, has heightened concerns. The attack, which involved projectiles that caused oil spillage, increased the risk premium for vessels passing through the Red Sea.

Economic and Geopolitical Developments Supporting Crude Oil

The Federal Reserve’s dovish policy shift is also supporting oil prices, with Fed Chair Jerome Powell signaling a possible rate cut in September. Additionally, oil production in Libya faces significant challenges. Libya’s Al Waha Company announced a partial reduction in output, citing ongoing pressure that could lead to a complete halt. This situation arises from disputes over control of the central bank between Libya’s eastern administration in Benghazi and the internationally recognized government in Tripoli, which has already led to a 3% increase in oil prices, with WTI nearing the $80 mark.

Regional Conflicts Adding to Oil Supply Concerns

Further contributing to market volatility, Israel launched numerous airstrikes in Lebanon on Sunday, describing these actions as preemptive measures to prevent Hezbollah from launching missile attacks. These regional conflicts continue to add uncertainty to the oil market, supporting higher prices due to fears of supply disruptions.

US WTI Crude Oil Live Chart