Oil prices rose slightly on Friday but remained on track for a second consecutive week of decline.
This dip was primarily attributed to the strengthening of the US dollar ahead of a speech by Federal Reserve Chair Jerome Powell and concerns over tight oil supply somewhat eased.
Brent crude, against which Nigerian oil is priced, saw an increase of 30 cents or 0.4% to settle at $83.66 per barrel by 04:34 a.m.
Similarly, U.S. West Texas Intermediate crude experienced a 0.4% gain, rising by 31 cents to $79.36 per barrel.
Over the course of the week, crude oil prices are expected to decline between 1.5% to 2.5%, marking a consecutive week of setbacks.
Yeap Jun Rong, a market analyst at IG, said, “No doubt the Fed’s policy outlook will be the key driving force for markets ahead.”
He added, “With fresh updates on U.S. inflation and labor market data after the previous FOMC meeting, focus will be on what factors the Fed Chair will have his attention on.”
Investor caution prevailed ahead of Powell’s remarks at the Jackson Hole Symposium, leading to a surge in the safe-haven dollar, reaching a 10-week high.
This spike, the largest in a month, left markets in anticipation of information regarding the duration of elevated interest rates. A strong dollar tends to make oil more expensive for holders of other currencies, potentially denting demand.
On the supply side, negotiations between Turkey and Iraq’s semi-autonomous Kurdistan regional government concerning northern Iraqi crude oil exports are still underway.
An agreement to restart oil exports was not reached earlier in the week, leading to a continued disruption in oil flows.
Turkey halted Iraqi oil flows via the Ceyhan port on March 25 after losing a long-standing arbitration case brought by Iraq.
Meanwhile, market observers closely track Iranian oil flows as Iran’s oil minister, as reported by state media, anticipates the country’s crude oil output to reach 3.4 million barrels per day by the end of September, despite ongoing U.S. sanctions.
Adding complexity to market sentiment, U.S. officials are developing a proposal to ease sanctions on Venezuela’s oil sector. This move would potentially allow more companies and countries to import Venezuelan crude oil.
Analysts pointed out that the support oil prices once received from production cuts has diminished and now expect Saudi Arabia to continue to extend its voluntary output reductions.
Analysts estimate that the top oil exporter will likely roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October.
This is driven by uncertainty about supplies and as the kingdom aims to reduce global inventories further.
