Oil prices experienced a significant rise of approximately 3% on Monday, driven by reports of a near-total halt in production in Libya, which added to existing concerns about potential disruptions in Middle Eastern oil supplies. By 1316 GMT, Brent crude futures increased by $2.28, reaching $81.30 per barrel, while U.S. crude futures climbed by $2.47 to $77.30 per barrel. Brent’s peak for the day, $81.40 per barrel, marked its highest level in 11 days.
The price surge followed an announcement from Libya’s eastern-based government, which declared the closure of all oil fields, effectively stopping production and exports. Although this government controls most of Libya’s oilfields, it is not internationally recognised. The Tripoli-based National Oil Corporation and the internationally recognised Tripoli government, which manage the country’s oil resources, have yet to confirm this development. Libya remains embroiled in a power struggle between factions over control of the central bank and oil revenue.
Analysts from major banks expressed concern over the potential impact of these events on the global oil market. Giovanni Staunovo of UBS highlighted the risk of a complete halt in Libyan oil production, which currently stands at around 1 million barrels per day. Similarly, Saxo Bank’s Ole Hansen suggested that a significant portion of Libya’s oil output could be offline for an extended period.
Investors are also closely monitoring the actions of OPEC and its allies, collectively known as OPEC+, as the group considers increasing production later this year. Market analysts such as Priyanka Sachdeva from Phillip Nova and Viktor Katona from Kpler noted that the ongoing political instability in Libya could significantly affect global oil demand and supply balances, potentially mirroring current market conditions into 2025.
The rise in oil prices was further influenced by escalating tensions in the Middle East, particularly after Hezbollah launched a major attack on Israel over the weekend. In response, Israel’s military retaliated with airstrikes in Lebanon, raising fears of a broader regional conflict. Analysts, including Kelvin Wong from OANDA, anticipate that geopolitical risks will continue to play a crucial role in shaping the oil market’s trajectory.
Monday’s price gains followed a strong performance on Friday when both oil benchmarks rose by more than 2% after U.S. Federal Reserve Chair Jerome Powell signalled the beginning of interest rate cuts, adding further momentum to the oil market’s upward trend.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
