Oil Prices Slide Over 2% as Supply Outlook Offsets Middle East Tensions

Oil prices saw a significant drop on Tuesday, falling more than 2%, as the prospect of increased supply and weaker global demand outweighed concerns about possible disruptions to crude exports due to rising tensions in the Middle East.

Brent crude futures dropped $1.49, or 2.08%, to $70.21 per barrel by 0840 GMT, while U.S. West Texas Intermediate crude fell by $1.55, or 2.27%, to $66.62.

Libya’s Potential Oil Recovery Adds Pressure

The market’s attention is turning to the upcoming OPEC+ meeting on Oct. 2, where no major policy changes are expected. The group is still set to increase output by 180,000 barrels per day in December, further raising concerns about a stronger supply outlook.

Libya’s potential recovery in oil production also weighed on prices. After a period of significant output cuts due to internal political issues, Libya’s parliament approved a new central bank governor on Monday, signaling a possible resolution to the crisis.

Middle East Tensions Support Prices

Despite the supply outlook, geopolitical concerns kept oil from falling further. The escalating conflict between Israel and Hezbollah, following the killing of Hezbollah’s leader Hassan Nasrallah, has raised fears of broader conflict potentially involving the U.S. and Iran.

„Concerns about Iran’s potential involvement in the conflict have lent some support to prices, although Iran seems cautious about escalating the situation beyond its proxy forces,“ said Ashley Kelty, an analyst at Panmure Gordon.

Meanwhile, U.S. crude oil inventories were expected to drop by approximately 2.1 million barrels last week, according to a preliminary Reuters poll. This followed forecasts ahead of the American Petroleum Institute’s report due on Tuesday.

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