Oil prices surged to a 10-month high on Tuesday, as the energy market braced for supply disruptions caused by catastrophic flooding in Libya.
Brent crude, the international benchmark, rose 2% to $92.38 a barrel, its highest level since November 2022. US oil prices also rose, with West Texas Intermediate crude up 2.3% to $89.29 a barrel.
The flooding in Libya has shut down several oil ports and production facilities, cutting the country’s output by an estimated 1 million barrels per day. Libya is a member of the Organization of the Petroleum Exporting Countries (OPEC), and its output is important to global oil supplies.
Analysts said the flooding in Libya is likely to keep oil prices elevated in the near term. “The market is pricing in the possibility of a prolonged disruption to Libyan exports,” said Matt Smith, lead oil analyst for the Americas at Kpler.
The higher oil prices are likely to add to inflationary pressures in the US and other economies. The US Consumer Price Index rose 8.6% in May, the highest rate of inflation in 40 years.
The Biden administration has been urging OPEC to increase production to help lower oil prices. However, OPEC has so far resisted these calls, saying that the market is well-supplied.
The flooding in Libya is the latest in a series of factors that have pushed oil prices higher in recent months. Other factors include the war in Ukraine, which has disrupted Russian oil exports, and the global economic recovery, which has increased demand for oil.
It is unclear how long the flooding in Libya will last or how much oil production will be affected. However, the market is clearly expecting a significant disruption, and that is why oil prices are rising.
In the meantime, consumers in the US and other countries can expect to see higher gasoline prices at the pump. The average price of gasoline in the US is currently $4.82 per gallon, and it is likely to continue to rise in the coming weeks.