Oil prices were stable in the early hours of Tuesday after declining by more than $1 on Monday amid rising global uncertainty in the wake of the Israel-Hamas war.
The decline was a result of two main factors, the anticipated relaxation of U.S. sanctions on Venezuela and the escalating conflict between Israel and Hamas.
Brent crude oil, against which Nigerian oil is priced, rose by 29 cents to settle at $89.94 per barrel while the U.S. West Texas Intermediate crude (WTI) appreciated by 20 cents to $86.86 a barrel.
These developments come amidst a backdrop of continued uncertainty in the global energy market.
The oil industry is cautiously optimistic as Venezuela’s government and opposition prepare to reinitiate suspended talks with President Nicolas Maduro suggesting potential benefits for the 2024 election.
If these discussions lead to a sanctions relief, it could be a game-changer, opening doors to Venezuela’s oil exports. Since 2019, the U.S. imposed sanctions on Venezuelan oil as a punitive measure, following contested elections in 2018.
However, the road to increased oil production in Venezuela remains long, hindered by a lack of recent investments.
Simultaneously, the Middle East is in focus as U.S. President Joe Biden prepares for a high-stakes visit to Israel amid escalating tensions with Hamas.
While the U.S. expresses support for Israel’s efforts to combat Hamas, it is also actively seeking to engage Arab states to prevent a broader regional conflict.
Iran’s commitment to “preemptive action” by its allies in the face of escalating tensions adds to the complexity of the situation.
According to ANZ Research, the risk of a broader conflict in the region remains high, with Iran’s foreign minister warning that the expansion of war fronts may be inevitable.
These geopolitical developments underscore the fragile equilibrium influencing global oil prices, with investors closely watching each twist and turn in this complex geopolitical chess game.