Increased risk of a region-wide Middle East war continued to push oil prices higher on Monday as Brent crude oil rose by $2.88, or 3.7 percent to settle at $80.93 per barrel.

Also, the US West Texas Intermediate (WTI) advanced by $2.76, or 3.7 percent, to $77.14 per barrel.

This extends gains from last week where the international benchmark rose more than 8 percent and WTI advanced by more than 9 percent week-on-week, the most in more than a year.

This is after Iran’s October 1 missile barrage against Israel raised concerns that the response from Israel would aim at the country’s oil infrastructure.

Market analysts warned that oil prices could rise by another $3 to $5 per barrel.

The development continued on Monday as Iran-backed Hezbollah hit Israel’s third-largest city, Haifa.

Israel, meanwhile, looked poised to expand ground incursions into southern Lebanon on the first anniversary of the Gaza war that has spread conflict across the Middle East.

After a year of war, authorities have stated officially that 728 troops have been killed and 26,000 missiles have been fired at Israel, compared to over 40,000 killed in Gaza.

Some analysts have suggested that Israel could strike a key export artery for Iranian oil, among other oil and gas targets that the US has asked Israel to avoid.

US President Joe Biden said that if he were in Israel’s shoes, he would consider alternatives to striking Iranian oil fields.

An attack on Iranian energy facilities would not be Israel’s preferred course of action, JPMorgan commodities analysts wrote on Friday.

Iran is a member of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ with production of around 3.2 million barrels per day or 3 per cent of global output.

Still, low levels of global oil inventories suggest that prices are set to be elevated until the conflict is resolved.

OPEC+ is due to start raising production in December after cutting in recent years to support prices because of weak global demand.

The federal government has announced that the Nigerian National Petroleum Corporation (NNPC) will begin supplying crude oil in Naira to the Dangote Petroleum Refinery within the next six months to implement the naira-for-crude initiative.

Following the directives of the Federal Executive Council, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced that the naira-for-crude initiative will commence on the first of October, 2024, with 385,000 barrels per day (385kbpd).

Edun stated that as crude oil is sold in Naira to the Dangote refinery, the refinery, in return, will supply petrol (PMS) and diesel of equivalent value to the domestic market in Naira.

“Diesel will be sold in Naira by the Dangote refinery to any interested off-taker. PMS will only be sold to NNPC. NNPC will then sell to various marketers for now. All associated regulatory costs (NPA, NIMASA, etc.) will also be paid in Naira. We are also setting up a one-stop shop that will coordinate service provision from all regulatory agencies, security agencies, and other stakeholders to ensure smooth implementation of this initiative,” Edun reiterated.

Since the removal of the fuel subsidy in May 2023, fuel pump prices have fluctuated, leading to recurrent price increases in commodities.

In the same vein, the Crude Oil Refinery Owners Association of Nigeria and the Petroleum Retail Outlet Owners Association of Nigeria stated, “The details of this agreement are not yet known, but we hope the intricacies will be revealed to the public because this business is central to everything that happens in our economy. PMS is key, and the pricing of crude oil is important as it determines the price of the commodity.”

Furthermore, a representative from the Dangote refinery commended the government for the naira-for-crude initiative, describing it as a positive step toward stabilizing fuel prices.

By not purchasing crude oil in dollars, fuel prices will no longer be dependent on foreign exchange fluctuations, enabling price stability.

“Otherwise, the local crude would have been purchased from foreign-based traders who often mark up their prices, which has a significant effect on the cost of producing refined commodities, whether in Nigeria or elsewhere,” the official stated.

Oil prices rose on Friday and settled with their biggest weekly gains in over a year on the threat of a wider war in the Middle East following Israel and Iran’s conflict.

Brent crude oil, against which Nigerian crude oil is priced, rose 43 cents (0.6%) to settle at $78.05 per barrel while the US West Texas Intermediate 9WTI) crude oil gained 67 cents (0.9%) to close at $74.38 per barrel.

Israel has vowed to strike Iran for launching a barrage of missiles at Israel on Tuesday after Israel assassinated the leader of Iran-backed Hezbollah a week ago.

Meanwhile, gains were limited as US President Joe Biden discouraged Israel from targeting Iranian oil facilities.

The development has oil analysts warning clients of the potential ramifications of a broader war in the Middle East.

Iranian oil tankers have started moving away from Kharg Island, Iran’s biggest oil export terminal, amid fears of an imminent attack by Israel on the most important crude export infrastructure in Iran.

Market analysts say that the OPEC spare capacity, concentrated in Saudi Arabia and the United Arab Emirates (UAE), would compensate for an Iranian loss of supply.

They noted that an even more significant disruption to supply from the Middle East could lead to triple-digit oil prices, but nothing suggests that attacks on oil infrastructure in other producers in the region or the closure of the Strait of Hormuz are low-probability events.

JPMorgan commodities analysts wrote that an attack on Iranian energy facilities would not be Israel’s preferred course of action.

However, low levels of global oil inventories suggest that prices are set to be elevated until the conflict is resolved, they added.

Iran is a member of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ with production of around 3.2 million barrels per day or 3 per cent of global output.

On Friday, Iran’s Supreme Leader Ayatollah Ali Khamenei appeared in public for the first time since his country launched the missile attack and said the country will not relent.

Supply fears have also eased in Libya as the country’s eastern-based government lifted the force majeure on output and exports just hours after a deal was reached for two compromise candidates to head the country’s central bank, which controls the country’s oil revenues.