Oil prices exhibited limited fluctuations on Thursday as the market absorbed the impact of reduced crude supply and apprehensions regarding a global economic deceleration.
Brent crude oil, against which Nigerian oil is priced, grew by 29 cents to $76.94 a barrel while the U.S. West Texas Intermediate crude oil rose by 37 cents to $72.16 after recording a 2.9% surge in post-holiday trading on Wednesday.
Addressing the supply side, leading oil exporters Saudi Arabia and Russia recently announced further cuts in output for August. These additional cuts bring the total reduction to over 5 million barrels per day (bpd), accounting for approximately 5% of global oil production.
The combined impact of these cuts and a larger-than-expected decrease in U.S. crude inventories provided some support to oil prices.
Tamas Varga, an analyst at PVM, said, “The oil balance will likely tighten, and so will financial conditions, as indicated by the recently released Federal Reserve minutes. Persistent concerns about a recession may impede progress, but it is unlikely to prevent oil prices from advancing.”
The market has anticipated further interest rate hikes in the United States and Europe to curb persistent high inflation levels. While fears of a global recession have heightened due to recent surveys revealing a slowdown in factory and services activities in China and Europe.
Minutes from the Federal Reserve’s June meeting, released on Wednesday, revealed a consensus among central bank members to maintain the current interest rates to allow time for evaluation and determine the necessity for future policy tightening. However, most attendees anticipated eventual tightening of monetary policy.
The stability in oil prices amidst the backdrop of supply cuts, concerns over economic slowdown, and the cautious approach of central banks reflects the delicate balance the industry faces in the coming months. While uncertainties persist, the gradual recovery in oil prices seems to be on track, albeit subject to potential headwinds from global economic factors.
Overall, the oil market remains resilient, displaying its ability to adapt to various supply dynamics and economic uncertainties. The forthcoming months will provide further insight into how these variables will shape the future trajectory of oil prices.