By Adedapo Adesanya
Oil jumped more than 3 per cent on Monday as production cuts in Libya added to supply concerns stemming from reports of escalating conflict in the Middle East.
Brent crude futures went up by $2.41 or 3.05 per cent to trade at $81.43 a barrel, and the US West Texas Intermediate (WTI) crude futures appreciated by $2.59 or 3.5 per cent to close at $77.42 a barrel.
Libya’s rival government in the east announced the closure of all oilfields, production, and exports.
The Benghazi-based government in eastern Libya, which is a rival to the Tripoli-based government in the politically divided North African country, said on Monday it would shut down all crude oil output and exports.
While National Oil Corp, which controls the country’s oil resources, provided no confirmation, its subsidiary Waha Oil Company said it planned to gradually reduce output and warned of a complete halt to Libya’s production, citing unspecified protests and pressures.
Meanwhile, Sirte Oil Company, another NOC subsidiary, said it will start a partial reduction in production.
Libya is Africa’s 4th largest oil producer, about 1.18 million barrels per day in July, according to the Organisation of the Petroleum Exporting Countries (OPEC).
The threat to Libyan oil production and exports follows the move from the Tripoli-based government to replace the leadership of the country’s Central Bank in an escalating row about who should oversee Libya’s oil revenues.
Another geopolitical risk in the form of the Israel-Gaza war continues to impact the market after a long-expected missile attack by the Iranian-backed Hezbollah movement appeared to have been largely thwarted by pre-emptive Israeli strikes in southern Lebanon.
However, the US continues to assess that the threat of attack against Israel by Iran and its proxy groups still exists.
There was no agreement on Sunday in Gaza ceasefire talks that took place in Cairo, Egypt, with neither Hamas nor Israel agreeing to several compromises presented by mediators.
An oil tanker has been on fire in the Red Sea since August 23 after an attack by Yemen’s Houthis, EU Red Sea naval mission Aspides said on Monday.
Investors remain cautious over the actions of OPEC and its allies, or OPEC+, which has plans to raise output later this year.