Oil prices saw a decline on Monday as concerns over global economic growth and the outlook for fuel demand weighed heavily on the commodity market.
Brent crude oil, against which Nigerian oil is priced fell by 1.1%, or 86 cents, to $82.52 a barrel while US West Texas Intermediate crude dropped by 1.1%, or 83 cents, to $78.70.
This marks the first weekly decline in five weeks for both oils as the US implied gasoline demand fell from a year earlier. Weak economic data from the US and worse-than-expected corporate earnings from the technology sector have sparked growth concerns among investors.
The stabilizing US dollar and climbing bond yields are also adding pressure on commodity markets, according to CMC Markets analyst Tina Teng.
In addition to all these, central banks from the US, Britain, and Europe are all expected to raise interest rates in the first week of May to tackle high inflation.
China’s economic recovery after the COVID-19 pandemic is also creating uncertainty for oil demand, despite the record volumes of crude oil imports reported in March. The country’s imports from leading suppliers Russia and Saudi Arabia each topped two million barrels per day.
Furthermore, refining margins in Asia have weakened due to record production from top refiners China and India, curbing the region’s appetite for Middle East supplies loading in June.
Despite these economic jitters, analysts and traders had previously predicted robust fuel demand from China in the second half of 2023 and supply tightness from additional supply cuts planned by the OPEC+ producer group starting in May.
Independent oil analyst Sugandha Sachdeva believes that these planned output cuts and China’s strong demand outlook could provide support to oil prices in the coming days.
However, Sachdeva also noted that Brent is likely to find key support around $79 a barrel, while WTI crude support is aligned at $75.
The outlook for oil prices remains uncertain amidst the current economic landscape, but these factors suggest that the future of the oil market will continue to be heavily influenced by global economic trends and government policies.
