Oil prices fell on Tuesday, halting recent gains after rising more than 7% in the previous three sessions on supply concerns triggered by fears of a wider Middle East conflict and the potential closure of Libya’s oil fields.
Brent crude futures were down 18 cents, or 0.2%, at $81.25 a barrel by 0430 GMT, while WTI Crude futures were down 28 cents, or 0.4%, at $77.14 a barrel.
Oil losses appeared to be contained in today’s session, suggesting prices are taking a breather after rising over the past few days.
Market participants are in wait-and-see mode to assess further developments, with rising oil prices pricing in geopolitical risks in the Middle East and production halts in Libya.
Oil markets have risen sharply in the previous three sessions on expectations of a US rate cut that could boost fuel demand, military strikes that threaten a Middle East conflict and disrupt supplies from the main producing region, and possible closures in Libya.
WTI gained 7.6% and Brent gained 7% in the period.
Following tensions over the central bank’s leadership, the eastern-based government said on Monday that oil fields in eastern Libya, which account for almost all of the country’s output, would be closed and production and exports would be halted.
However, there was no confirmation from the country’s internationally recognized Tripoli government or the National Oil Corporation (NOC), which controls the country’s oil resources.
The political dispute could affect almost all of the North African country’s 1.17 million barrels per day of production.
While the downtrend in global oil demand could affect oil prices, the potential closure of Libya’s oil fields would tighten supplies and put a brake on falling oil prices, although Chinese demand has a major impact.
Other oil producers may be happy with higher oil prices and may not want to increase supply immediately.
Oil is also supported by the escalation of the conflict between Israel and Hezbollah. Markets remain tense as the fighting between Israel and Hezbollah intensifies.
The danger of war has diminished somewhat, but an Iranian attack on Israel remains a risk.
