Global oil prices surged by 2% on Tuesday following a combination of heightened tensions in the Middle East and a significant disruption in Libyan oil supply.
Brent crude oil, against which Nigerian oil is priced, gained $1.47 or 1.9% to settle at $77.59 per barrel while the U.S. West Texas Intermediate crude (WTI) appreciated by $1.47, or 2.1% to close at $72.24 a barrel.
A key driver behind this upward momentum was the closure of Libya’s Sharara oilfield, one of the nation’s largest oilfields with a production capacity of 300,000 barrels per day (bpd).
The Sharara oilfield has historically been susceptible to disruptions due to local and broader political protests.
This event, coupled with escalating tensions in the Middle East created a bullish environment for oil prices.
The Israeli military’s announcement that its conflict with Hamas would extend through 2024 heightened concerns that the regional crisis could potentially disrupt oil supplies.
Also, ongoing attacks by Iran-aligned Houthi militants in the Red Sea led major shipping companies to avoid the region, although the impact on oil tanker movements was less severe than anticipated.
Despite these geopolitical concerns, some shipping companies favored routes to the United States, where crude oil prices are currently more competitive than Brent.
Bob Yawger, the director of energy futures at Mizuho, noted, “The more attractive alternative for (oil tankers) right now is to make a dash for the United States, where crude oil is cheaper than Brent.”
