Market Analysis

Oil rebounded on Wednesday following a sharp drop in the previous session that ended a three-day winning streak. Investors remain torn between concerns about potential supply disruptions from Libya and the Middle East, and worries over global fuel demand.

Brent crude futures rose by 25 cents, or 0.31%, to $79.80 per barrel at 0209 GMT. U.S. West Texas Intermediate (WTI) crude futures increased by 17 cents, or 0.23%, trading at $75.70 per barrel.

These price gains follow Tuesday's decline of over 2%, which interrupted a three-day rally that had pushed prices up by more than 7%. The drop was attributed to concerns over weak refinery profit margins and data showing that global fuel consumption growth has been slower than expected this year.

The market also found support from industry data released on Tuesday, which indicated a decrease in U.S. oil and fuel inventories last week.

However, significant risks linger, particularly the potential loss of supply from Libya, where production of about 1.2 million barrels per day could be at risk due to a political dispute between rival government factions. Additionally, there is concern over the escalation of the Israel-Gaza conflict, which could involve militants in Lebanon and forces from Iran, a major oil producer in the Middle East.

"Geopolitical risks continue to loom over the market," ANZ analysts noted in a report.

On Tuesday, engineers reported that several oilfields across Libya had ceased production amid a dispute over control of the central bank and oil revenues. However, there has been no official confirmation of these closures from the Tripoli-based government or the National Oil Corporation (NOC), which manages Libya's oil resources.

Engineers at the southeastern Amal and Nafoora oilfields reported that production had been halted, while output at Abu Attifel, also located in the east, was reportedly reduced.

Meanwhile, fighting continues in the Gaza Strip between Israel and Hamas militants, displacing numerous Palestinians, with little progress in ceasefire talks in Cairo.

The situation is further complicated by recent exchanges of fire between Israel and the Iranian-backed Hezbollah along the Lebanese border over the weekend.

In the U.S., crude oil inventories fell by 3.407 million barrels for the week ending August 23, according to sources citing American Petroleum Institute (API) data released on Tuesday. Gasoline inventories decreased by 1.863 million barrels, and distillate stocks fell by 1.405 million barrels.

The U.S. Energy Information Administration (EIA) is expected to release its weekly oil storage data later on Wednesday at 10:30 a.m. EDT.

Paraphrasing text from "Reuters" all rights reserved by the original author.