The oil market remains in a range around three-month highs as tightened supplies and reassurances from Chinese authorities to support their economy bolstered oil prices.
Even though Western economic data poses some challenges, the outlook remains positive for now with Brent crude oil, the international benchmark for Nigerian oil, unchanged at $82.74 a barrel while the U.S. West Texas Intermediate (WTI) crude increased slightly by 1 cent, or 0.01% to $78.75 per barrel.
In the last month, both crude oils have enjoyed four consecutive weeks of gains, largely driven by anticipated supply reductions from the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
The situation in the oil market has further been accentuated by a phenomenon known as backwardation, whereby earlier-loading Brent contracts command higher prices than later loadings. This trend suggests traders perceive tight supply conditions, and the six-month spread has reached a two-and-a-half-month high.
However, concerns are emerging regarding the action of Russia against Ukraine on Monday.
According to energy experts, growing risks following Russia’s actions against Ukrainian port infrastructure along the Danube River could spill over into energy markets, causing nervousness among investors.
On a more positive note, Chinese leaders have pledged to bolster economic policy support, buoying sentiment in the world’s second-largest oil consumer.
Meanwhile, in the eurozone, business activity declined more than expected in July, according to a survey. In the United States, business activity also slowed to a five-month low in July, suggesting possible challenges ahead.
However, falling input prices and slower hiring have sparked hopes that the Federal Reserve may make progress in its efforts to curb inflation. Markets are anticipating 25-basis-point rate hikes from both the Fed and the European Central Bank this week.
Investors eagerly await U.S. industry data on inventories, expected to be released around 2030 GMT. Analysts, on average, estimate a decline of approximately 2 million barrels in crude inventories for the week ending July 21, which may further influence market dynamics.