Oil prices rally on Libya output cuts, fears of wider Middle East conflict

Investing.com -- Oil prices rallied Monday, driven by Libya output cuts and fresh concerns about a wider escalation in the Middle East following an escalation in Israel-Hezbollah tensions and waning hopes for a Gaza ceasefire. 

At 14:18 ET (18:18 GMT), the Brent oil futures expiring in October rose 2.9% to $80.42 a barrel, while West Texas Intermediate crude futures rose 3.5% to $77.50 a barrel.  Libya output cuts offer support 

Reports Monday that Libya's eastern government said it was shutting crude exports and production amid a dispute with the country's western government.

The disruption comes as fears about a supply glut persist ahead of fresh wave of OPEC barrels as the oil cartel is expected to begin slowly unwidning its production cuts later this year.   Gaza ceasefire remains elusive in Cairo talks; renewed fears of wider Middle East conflict    

Media reports showed that talks between Hamas and Israel in Cairo yielded no agreement for a ceasefire over the weekend, diminishing any chances of deescalation in the 10-month old war.

U.S. officials said the talks were constructive, although the apparent lack of an agreement undermined earlier, optimistic comments from U.S. officials. Still, talks are set to continue in the coming days.

The waning hopes for a ceasefire agreement come as fresh worries about wider Middle East conflict intensified after Hezbollah and Israel traded strikes over the weekend. Both sides have said, however, that aren't seeking war. 

Persistent instability in the Middle East saw traders attach some risk premium to oil, amid bets that a spillover of the Israel-Hamas conflict could destabilize oil production in the crude-rich region. 

(Ambar Warrick contributed to this story)

Source: Investing.com