By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices rose nearly 3% on Monday as supply concerns sharpened on reports of escalating conflict in the Middle East as well as production cuts in Libya.
Brent crude futures climbed $2.28, or 2.89%, to $81.30 a barrel by 10:30 a.m. ET (1430 GMT), while U.S. crude futures were at $77.30 a barrel, up $2.47, or 3.3%.
Both benchmarks had gained more than 2% on Friday.
“The near term buying seems justified,” said Dennis Kissler, senior vice president of trading at BOK Financial, citing Middle East tensions and Libyan production outages.
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, there was no agreement on Sunday in Gaza ceasefire talks that took place in Cairo, with neither Hamas nor Israel agreeing to several compromises presented by mediators, two Egyptian security sources said, casting doubt on the chances of success in the latest U.S.-backed effort to end the 10-month-old war.
Oil prices jumped after Libya’s eastern-based government announced the closure of all oil fields on Monday, halting production and exports.
National Oil Corp (NOC), which controls the country’s oil resources, provided no confirmation. However, Libya’s Sirte Oil Company, an NOC subsidiary, said it will start a partial reduction in production.
“The biggest risk for the oil market is probably a further drop in Libyan oil production due to political tensions in the country, with a risk that production could fall from current levels of 1 million barrels per day to zero,” said analyst Giovanni Staunovo of Swiss bank UBS.
Investors remain cautious over the actions of the Organization of Petroleum Exporting Countries (OPEC) and its allies, or OPEC+, which has plans to raise output later this year, said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“Most oil forecasters expect 2025 oil demand growth to hover around 1 million b/d. Were Libya to go down in another bout of civil war, the balances of 2025 could look very similar to this year’s despite more Saudi and Russian production,” Viktor Katona, lead crude analyst at Kpler, added.
On the demand side, increasing signs of lackluster growth and emerging risks to the job market overshadowed a gathering of global policymakers at the U.S. Federal Reserve’s annual Jackson Hole conference, highlighting the changing trajectory of monetary policy as U.S. and European central banks eye cutting interest rates.
(Reporting by Robert Harvey in London, and Florence Tan and Emily Chow in Singapore; Editing by Bernadette Baum, Kirsten Donovan)
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