Oil prices fall on Libya production, Middle East conflict By Investing.com

Investing.com– Oil prices fell in Asian trade on Tuesday, easing after a strong rally in recent sessions as traders looked for more clues about production disruptions in Libya and a broader war in the Middle East.

Prices were also subject to some profit-taking after returning about 7% over the past three sessions.

U.S. crude that expires in October was down 0.3 percent at $81.17 a barrel, while it was down 0.4 percent at $77.12 a barrel by 9:03 p.m. ET (01:03 GMT ).

Expectations of lower US interest rates have also boosted oil prices in recent sessions, following a string of dovish signals from the Federal Reserve.

Production in Libya has been suspended amid the conflict over the central bank

Media reports indicated that oil fields in eastern Libya – which account for almost all of the country’s crude production – will be shut down while exports will be halted amid a growing dispute over the leadership of Libya’s central bank.

Eastern and western factions in the country have been seen mobilizing military forces amid calls for the ouster of Libya’s Central Bank chief Sadiq Al-Kabir. The central bank is the only internationally recognized depository for payments for Libyan oil exports.

Libyan oil production was nearly 1.2 million barrels per day in July, recent data from the Organization of the Petroleum Exporting Countries (OPEC) showed.

Any extended disruption in oil supply shows tighter global oil markets and also comes amid signs of resilient US fuel demand.

Tensions in the Middle East persist amid the lack of a cease-fire in Gaza

Concerns about a wider war in the Middle East after Israel and Hamas failed to reach a ceasefire deal over the weekend prompted traders to attach a risk premium to oil.

Israel launched a pre-emptive strike against targets in Lebanon, while the Hezbollah group launched several rocket strikes on parts of Israel.

While both sides have signaled they are not seeking further escalation, the strikes have further undermined progress towards a potential ceasefire.

Dollar recovery halts crude oil rally

While expectations of a September interest rate cut remained in play, some ground was recovered from Monday’s recent losses, helped by haven demand.

The dollar’s strength has stalled crude oil’s advance, as a stronger dollar makes oil more expensive for foreign buyers.