This week, crude oil prices rebounded sharply from their recent lows, driven by a potent mix of geopolitical risks, tightening supply, and improving economic indicators.
Both Brent and WTI benchmarks recorded gains for three consecutive sessions, marking a significant turnaround from Monday’s eight-month lows.
Middle East Conflict Ignites Supply Concerns
The specter of escalating conflict in the Middle East emerged as a primary catalyst for oil’s upward movement. The recent assassinations of senior Hamas and Hezbollah members have heightened fears of Iranian retaliation against Israel. This tension raises the possibility of supply disruptions from the world’s most critical oil-producing region. The market remains on edge, with traders closely monitoring developments that could potentially spark a wider regional conflict.
Libya’s Production Woes Add to Supply Squeeze
Compounding supply worries, Libya’s National Oil Corporation declared force majeure at its Sharara oilfield due to protests. This unexpected disruption removes a significant amount of oil from the market, with Sharara’s capacity of 300,000 barrels per day now offline. The reduction in Libyan output further tightens global supply, providing additional support to prices.
U.S. Inventory Draw Signals Strong Demand
A substantial drop in U.S. crude inventories bolstered the bullish sentiment. The Energy Information Administration reported a drawdown of 3.7 million barrels last week.