BEIJING: In Asian trading on Tuesday, oil prices retreated following a significant surge in the previous three sessions driven by mounting supply concerns. Brent crude futures fell by 32 cents, or 0.39 percent, settling at $81.11 a barrel, while U.S. West Texas Intermediate (WTI) crude futures decreased by 36 cents, or 0.46 percent, to $77.06 a barrel.
The recent surge in oil prices—where WTI rose by 7.6 percent and Brent by 7 percent—was fueled by multiple factors. Key among them were heightened fears of a broader Middle East conflict and disruptions in Libyan oil production. These concerns were exacerbated by escalating military engagements between Israel and Hezbollah in Lebanon over the weekend, which raised the possibility of supply disruptions from the critical oil-producing region.
Additionally, the market had been buoyed by expectations of potential U.S. interest rate cuts, which could stimulate fuel demand. Analysts from ANZ noted that “markets remain on edge as skirmishes between Israel and Hezbollah intensify,” with the risk of actual oil supply disruptions becoming more tangible following Libya’s eastern government announcement of a halt in oil production and exports due to political disputes. This political turmoil in Libya could impact up to 1.17 million barrels per day of output, based on the Organization of Petroleum Exporting Countries’ (OPEC) latest production survey.
The conflict between Israel and Hezbollah has further supported oil prices, with recent missile exchanges marking a significant escalation. Despite a top U.S. general’s comments on Monday suggesting that the risk of a broader conflict had eased somewhat, concerns persist over the potential for an Iranian strike on Israel. As oil prices retract slightly, the market remains vigilant, balancing concerns over geopolitical instability with ongoing monitoring of supply disruptions and potential policy changes that could influence demand.
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