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Crude oil futures rose more than 3% on Monday after Israel and Hezbollah traded blows over the weekend and Libya’s rival eastern government said it had halted oil production and exports, adding to gains on Friday after Federal Reserve Chairman Jerome Powell said the United States would cut its oil output. It indicated that it would start cutting interest rates in September.
Oil prices had already risen on Monday after Israel sent more than 100 warplanes to destroy thousands of Hezbollah rocket launchers on Sunday, prompting the terror group to retaliate. But prices spiked after Libya’s eastern government declared force majeure on all oil production and exports in a dispute over control of the country’s central bank. The loss of all Libyan exports would have a major impact on global oil markets.
Batch of clashes between Israel and Hezbollah likely to be short-lived Warren Patterson and Ewa Manthey, ING strategists, said it may not last unless Iran gets more directly involved, which would “raise oil supply risks more significantly,” Dow Jones reported.
Libya pieces representReal barrels can be lost.“This would tighten the physical market as long as this continues,” said Giovanni Staunovo, an analyst at UBS, according to Bloomberg, with “the risk that production could fall from its current levels of 1 million barrels a day to zero,” adding that how long such a disruption could last is “the hard part to assess.”
Libyan barrels of light sweet crude… Not easily replaceablePhil Flynn, senior market analyst at Price Futures Group, said: Market monitoring.
“Most oil forecasters expect oil demand growth in 2025 to be around 1 million barrels per day. If another civil war breaks out in Libya, demand balances in 2025 will rise to around 100 million barrels per day. It may look very similar to this year. “Despite the increase in Saudi and Russian production,” Victor Katona, a crude oil analyst at Kpler, told Reuters.
“US crude is likely to be the biggest beneficiary here, with European buyers turning to light sweet US shale to replace lost Libyan supplies,” said Matt Smith of Kpler, which explains why “WTI is up significantly today, outperforming Brent.”
US Light Crude Oil (CL1:COM) for October delivery closed +3.4% To $77.42 a barrel, its highest level since August 15, Brent crude (CO1:COM) ended the previous month’s trading in October. +3% To $81.43 a barrel, its best closing level since August 12.
ETFs: (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI)
energy (New York, California:XLE) was the strongest sector on the S&P 500 during the day, closing +0.9%Six energy names are among the top 15 gainers in the S&P 500: EOG Resources (EOG) +2.5%XEL Energy Corporation +2.2%Exxon Mobil (XOM) +2.1%ConocoPhillips (COP) +1.9%Marathon Oil (MRO) +1.8%and ABA. (What) +1.8%.
Middle East premium rises, Fed signals September rate cut and another potential draw in US crude inventories this week Support should be added to crude oil.“Any of these elements could appear to be able to provide support to the market and we feel that the combination of these factors could force WTI to the $80 level” in another week or two, Ritterbusch said, according to Dow Jones.