Image Credits : The Financial Express
Oil prices experienced a slight decline on Tuesday after a brief increase earlier in the day, as traders weighed the impact of escalating tensions in the Middle East against a partial production halt at Libya’s largest oilfield and signs of a potential slowdown in the U.S. economy.
Brent crude, the global benchmark, dropped by 0.07% to $76.25 per barrel at 4:22 PM UAE time. West Texas Intermediate (WTI), which tracks U.S. crude, fell by 0.36% to $72.78 per barrel.
The decline follows Libya’s National Oil Corporation’s (NOC) announcement of a gradual reduction in production at the Sharara oilfield due to force majeure triggered by regional protests. The field, which had been producing 270,000 barrels per day (bpd) before the shutdown, was operating at around 130,000 bpd by Tuesday morning. This reduction began with a partial shutdown on the evening of August 3, resulting in an initial decrease of approximately 30,000 bpd, according to Francesco Calzoni, regional manager for North Africa and the Gulf regions at Aldebaran Threat Consultants.
“Production decreased by roughly 30,000 bpd in the first 24 hours,” Calzoni said. “As of this morning, we have confirmed a 50% decrease in production, bringing it close to 130,000 bpd. It may drop further, but it is unlikely to cease entirely.
The Sharara oilfield is a joint venture involving NOC, France’s TotalEnergies, Spain’s Repsol, Austria’s OMV, and Norway’s Equinor. OMV reported that the production reduction, which began on August 3 at 4 PM local time, was extended the following day. The cause of the shutdown remains unclear, and the situation is under close monitoring.
Libya has remained politically divided since the civil war that followed the 2011 revolution. The western region of the country is administered by the internationally recognized Government of National Unity (GNU), which was created through a UN-led political process. In contrast, the eastern region is governed by the rival Government of National Stability, which seized control of approximately three-quarters of the country’s oil production capacity in March 2022.
The Tripoli-based GNU has described the oilfield’s shutdown as “political blackmail,” though it has not provided further details.
Oil prices have fluctuated recently as traders assess the potential for a full-blown Middle East conflict and the growing risk of a U.S. recession. Global stocks have tumbled following a weak U.S. jobs report last week, which raised concerns about economic growth and delayed interest rate cuts by the Federal Reserve. The U.S. Labor Department reported a slower addition of jobs in July—114,000 compared to 179,000 in June—along with an unexpected rise in the unemployment rate to 4.3%, its highest level since October 2021.
Crude prices had surged by about 3% last week following the killings of Hamas leader Ismail Haniyeh in Tehran and Hezbollah military commander Fouad Shukr in Beirut, which heightened fears of a wider regional conflict.