Oil prices rose on Monday as investors evaluated efforts by authorities to address concerns about the global banking system.
Brent crude oil, against which Nigerian oil is priced increased by 1.03% or 77 cents, reaching $75.76 a barrel at 9:00 am, while the US West Texas Intermediate crude rose by 1.03% or 74 cents to $70 a barrel. This follows a 2.8% increase in Brent and a 3.8% rebound in WTI as concerns in the banking sector decreased.
Despite the oil fundamentals remaining on the sidelines, crude markets are observing the sentiment in the financial market, according to Vandana Hari, the founder of oil market analysis provider Vanda Insights.
Hari stated, “Expect most price action in Brent and WTI futures to occur during the Europe and US trading hours, marked by plenty of intraday volatility.” Hari added that a strong rebound is not expected until the banking crisis is fully resolved, which may take days or weeks.
In other news, First Citizens BancShares Inc announced that it will acquire the deposits and loans of Silicon Valley Bank, closing one chapter in the financial market crisis. Furthermore, the US authorities are reportedly discussing expanding emergency lending facilities, which has given hopes for additional support for bank funding.
Oil prices have also gained support from Russian President Vladimir Putin’s announcement to place tactical nuclear weapons in Belarus, which has escalated tensions in Europe. It is one of Russia’s most significant nuclear signals yet, and it serves as a warning to NATO over its military support for Ukraine.
In response, Ukraine has called for a meeting of the United Nations Security Council, and NATO criticized Putin’s “dangerous and irresponsible” nuclear rhetoric.
Despite the rise in oil prices, Russia’s Deputy Prime Minister Alexander Novak has reported that Moscow is on the verge of achieving its target of reducing crude output by 500,000 barrels per day (bpd) to around 9.5 million bpd.
However, according to industry sources and Reuters calculations, Russia’s crude exports are expected to remain steady as it cuts refinery output in April. Since September 2022, Russian crude stocks have been increasing, and experts suggest that if Russia wants to draw down the inventories it has built, output cuts may need to be extended beyond June.
Meanwhile, in France, industrial action is affecting refineries, reducing crude demand and fuel production. Investors are awaiting China’s manufacturing and services purchasing managers’ indexes for cues on demand from the world’s leading crude oil importer.
According to Baker Hughes Co, oil rigs rose by four to 593 last week in the US, up for the first time in six weeks, while gas rigs held steady at 162.