Oil prices fell in Asian trading on Tuesday after rising more than 7% over the previous three sessions, driven by supply concerns due to escalating conflict in the Middle East and the closure of Libyan oil fields.
Brent crude futures dropped by around 32 cents, or 0.39%, to $81.11 per barrel by 01:54 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 36 cents, or 0.46%, to $77.06 per barrel.
The decline in oil markets follows significant gains in the prior three sessions, supported by expectations of a U.S. interest rate cut, which could boost fuel demand, and recent military clashes between Israel and Hezbollah in Lebanon over the weekend. These events raise concerns about the potential expansion of conflict in the Middle East, a region crucial for oil production, which could disrupt supplies. Additionally, the closure of oil fields in Libya adds to supply worries.
Analysts at ANZ noted in a memo, “Markets remain tense as skirmishes between Israel and Hezbollah escalate… The risk of oil supply disruption has become real after the Libyan parliament government announced it would halt all oil production and exports amid escalating political conflict.”
This political conflict could impact production levels of up to 1.17 million barrels per day from Libya, according to data from the latest Reuters survey on OPEC production in July.
Oil also received support from the escalating conflict between Israel and Hezbollah, marked by a significant exchange of rocket fire as Hezbollah sought to retaliate for the killing of a senior commander last month.