Crude oil prices moderated slightly on Monday as concerns about China’s rising COVID-19 cases weigh on sentiment and clouded prospects for higher demand.
Brent crude oil, the international benchmark for Nigerian crude oil, dipped by 62 cents or 0.7% to $84.66 a barrel, while U.S. West Texas Intermediate crude declined by 51 cents or 0.6% to $79.35 a barrel.
“Both benchmarks WTI and Brent eased on Monday morning as investors gauge that the rising number of COVID-infections (in China) might create hurdles in ways of returning to normalcy,” said Priyanka Sachdeva, market analyst at Phillip Nova.
“Caution definitely prevails in oil markets amid ambiguity of the rate hikes cycle by (the) Federal Reserve, surprise build-up in U.S. crude oil inventories and whether the IEA (International Energy Agency) revises its outlook on oil prices and demand for the year,” Sachdeva said.
Both crude oils grew more than 8% last week, the biggest weekly gains since October and that may have spurred some short-term selling to lock in the profits from the move higher.
“After the scale of the move last week, we could be seeing some profit taking,” said Warren Patterson, ING’s Head of Commodities Strategy, adding that thinner trading volumes would make any selling appear to be more pronounced.
While prices retreated after last week’s surge, they continued to hover near 2023 highs on Monday.
China’s crude imports rose 4% year-on-year in December, while an expected resurgence in travel for the Lunar New Year holiday at the end of the week is brightening the outlook for transportation fuels.
Traffic levels in China are continuing to rebound from record lows following the easing of COVID-19 restrictions, resulting in stronger demand for crude and oil products, ANZ analysts said in a note.
The rebound in domestic demand is expected to lead to a 40% drop in China’s exports of refined oil products in January from December’s figure, led by gasoline, trading sources and analysts said.
Meanwhile, the Organization of the Petroleum Exporting Countries and the International Energy Agency will release their monthly reports this week, closely watched by investors for global demand and supply outlooks.
Investors will also be watching for a key Bank of Japan (BOJ) meeting this week to determine if it would defend its super-sized stimulus policy.
Crude Oil Dips Slightly on Friday Amid Demand Concerns
On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.
Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.
Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.
The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.
This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.
Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.
Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.
While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.
Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO
The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.
Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.
Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.
He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.
Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.
The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.
Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.
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