Oil Prices Jump Nearly 3% as Middle East Conflicts and Libyan Production Halt Impact Market

Oil prices saw a significant increase on Monday, with West Texas Intermediate (WTI) climbing nearly 3% to just above $77 per barrel. Brent crude, which is the global standard, went up more than 2%, reaching over $80 per barrel. This sharp rise is mainly due to two key factors: growing tensions in the Middle East and a halt in oil production from Libya.

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Rising Tensions in the Middle East

Recent events have caused a spike in oil prices. First, there has been a rise in conflict in the Middle East. Israel recently launched airstrikes against Hezbollah rocket sites in Lebanon. This has raised fears that the situation could escalate and involve Iran, a major player in the oil market. If tensions with Iran increase, it could disrupt oil supplies, which drives prices up.

Additionally, attacks by Houthi rebels, who are aligned with Iran, on ships in the Red Sea have added to the uncertainty. Last weekend, a Greek oil tanker was damaged in these attacks, causing further concerns in the oil market.

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Libyan Production Halt Creates Supply Worries

Libya, a significant oil producer, has temporarily stopped its oil production and exports due to a political dispute over the central bank's leadership. This shutdown affects more than 1 million barrels of oil per day, which is a large portion of the global supply. This disruption has worsened the situation, pushing oil prices even higher.

Impact on Gas Prices and Market Trends

Even with the rise in oil prices, U.S. gasoline prices have generally been falling from their peak in August. The average price for gasoline in the U.S. is now about $3.35 per gallon. This is $0.16 lower than last month and $0.47 lower than a year ago.

Experts suggest that while recent increases in oil prices might temporarily stop gasoline prices from dropping further, they are unlikely to cause a major rise in the near future. After Labor Day, gasoline demand usually drops by about 5%-6%, or roughly 400,000 barrels per day. Also, with fewer severe weather events expected, there’s less chance of disruptions in oil supply from hurricanes.

What to Watch For in the Coming Months

Looking ahead, if the oil market adjusts to new supplies and if geopolitical tensions ease, gasoline prices might stabilize or even drop further. The fourth quarter of the year could see some of the lowest gasoline prices since 2021, assuming current trends continue.

Also Read: Oil Prices Fluctuate After US Crude Stockpile Drop and Geopolitical Tensions