Oil prices dipped more than 4 percent on Tuesday following the news of a possible ceasefire between Hezbollah and Israel.
Brent crude, the international benchmark for Nigerian crude oil, declined $3.75, or 4.63 percent to settle at $77.18 a barrel while the US West Texas Intermediate(WTI) lost $3.57, or 4.63 percent to close at $73.57 a barrel.
The oil price rally began after Iran launched a missile barrage at Israel on October 1 and Israel swore to retaliate and said it was weighing its options including attacking Iran’s oil infrastructure.
Analysts also said an attack on Iranian oil infrastructure was unlikely and warned oil prices could face considerable downward pressure if Israel focuses on any other target.
However, it was reported that Hezbollah left the door open to a negotiated ceasefire after Israel raised the stakes in the conflict with its Iran-backed enemy by making new attacks in the south of Lebanon.
Prices also headed south when it became obvious that there have been no actual supply disruption in the Middle East.
Efforts at diplomacy continue with the US fearing the conflict could affect the wider, oil-producing Middle East. The return of Libya’s oil production and exports after more than a month of hiatus due to the political stalemate has also weighed on the prices.
The North African country’s crude oil and condensates have reached 1,133,133 barrels per day, according to the National Oil Corporation (NOC) on Tuesday.
Meanwhile, support could come as Hurricane Milton intensified into a Category 5 storm in the US on its way to Florida after forcing at least one oil and gas platform in the Gulf of Mexico to shut on Monday.
According to the American Petroleum Institute (API), crude oil inventories in the US rose by a shocking 10.9 million barrels for the week ending October 4. For the week prior, the API reported a 1.5-million-barrel decrease in crude inventories.
So far this year, crude oil inventories have slumped by just 5 million barrels since the beginning of the year, according to API data.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.