Oil prices dip after recent surge driven by Middle East tensions

Oil prices eased on Tuesday, following a three-day surge driven by concerns over potential supply disruptions in Libya and escalating conflict in the Middle East.

Brent crude futures dipped, while U.S. West Texas Intermediate crude also fell. This slight retreat comes after Brent and WTI saw gains of 7% and 7.6%, respectively, in the previous sessions.

The market’s apprehension over geopolitical threats is reflected in the recent price volatility. Authorities in eastern Libya threatened to close down the majority of the country’s oil fields, which may stop exports and production. Almost all of the nation’s daily production of 1.17 million barrels comes from these fields.

“It highlights an oil market that, without a prolonged Libyan supply disruption, may struggle to move much higher, with the mid-80s potentially providing a ceiling for now,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Adding to the concerns, tensions between Israel and Iran-backed Hezbollah have flared up. “Markets remain on edge as skirmishes between Israel and Hezbollah intensify,” noted ANZ analysts.

While a top U.S. general suggested the risk of a wider war had eased, the potential for an Iranian strike on Israel remains a concern.

The oil market is currently keeping a close eye on events in Libya and the Middle East because any further escalation might have a big influence on supplies and pricing worldwide.

“It highlights an oil market that, without a prolonged Libyan supply disruption, may struggle to move much higher, with the mid-80s potentially providing a ceiling for now,” Hansen added.

“Markets remain on edge as skirmishes between Israel and Hezbollah intensify,” ANZ analysts said in a note.