Oil prices fell on Tuesday, retreating from a more than 7% increase over the previous three sessions.
The decline was fueled by concerns over Middle East tensions and a potential shutdown of Libyan oil fields.
By 1311 GMT, Brent crude futures were down 47 cents, or 0.58%, to $80.96 a barrel. U.S. West Texas Intermediate (WTI) crude futures dropped 54 cents, or 0.7%, to $76.88.
IG market strategist Yeap Jun Rong attributed the recent price slip to a collective pause among market participants, who are actively assessing ongoing developments.
The recent surge in oil prices was driven by fears of escalating conflicts in the Middle East and a production halt in Libya. These factors prompted a rebound from a broader downtrend since April, when Brent hit a 2024 peak of $91.17.
In Libya, production from the El Feel oilfield had been impacted. Authorities in the eastern region threatened to halt production and exports due to a flare-up in tensions over the central bank’s leadership.
The El Feel field and others in the east contribute nearly all of Libya’s crude oil output, which is 1.17 million barrels per day.
Saxo Bank’s head of commodity strategy, Ole Hansen, noted that while short-term supply concerns had driven Brent prices higher, the weak demand outlook—particularly for diesel—had led to lower refinery margins globally.
“This situation suggests that unless the Libyan supply disruption persists, the oil market might face challenges in rising further, with the mid-$80s potentially serving as a current ceiling,” Hansen warned, urging caution in future investments.
Oil prices have also been supported by increased conflict between Israel and Hezbollah, which intensified following the killing of a senior Hezbollah commander last month.
Analysts from ANZ indicated that the market remains cautious amid the ongoing skirmishes.
On Monday, a top U.S. general’s remarks significantly shaped the market sentiment, stating that while the risk of a broader regional war had somewhat diminished, a potential strike by Iran on Israel still posed a significant threat.
