Oil prices dipped slightly in European markets today after a three-day spike in prices driven by concerns about growing conflict in the Middle East and a cut in production by Libya.
A rally that began last week drove a 7% increase, including a 3% increase yesterday, pushing oil to its highest prices in two weeks, according to reports.
By this afternoon in Europe, Brent crude futures were down 47 cents, or 0.58% at $80.96 a barrel and U.S. West Texas Intermediate crude futures dropped 54 cents, or 0.7%, to $76.88, Reuters said.
Authorities in Benghazi in the east of Libya, where most of the country’s average of 1.2 million barrels per day is produced, are in a standoff with the internationally recognized government in Tripoli over control of the country’s central bank, according to reports. Production was halted at two oilfields and reduced at a third, Reuters said today.
Israel-Hezbollah tensions and dropping dollar
Upward pressure on prices also came from concerns about growing tensions between Israel and Hezbollah, though there is hope that conflict is cooling.
Another factor contributing to the increase was the dollar’s decline Monday, after Federal Reserve Chairman Jerome Powell said Friday that an interest rate cut is likely in September, according to Euronews.
It is unclear how long the standoff in Libya will last, and officials in Tripoli are not even commenting on the shut-down, Reuters said. In the short term US crude is likely to benefit, as Europe buys US shale oil to replace lost Libyan supply, according to CNBC.
Assuming the Libyan disruption is short-lived, crude prices can be expected to flatten and hover around the mid 80s, an analyst told Reuters.
