Oil benchmark Brent surged above $88 a barrel on Wednesday as concerns over escalating conflicts in the Middle East took center stage and overshadowed worries about sluggish economic prospects in Europe.
Brent crude oil, against which Nigerian oil is priced, edged up by 11 cents to $88.18 a barrel while the U.S. West Texas Intermediate crude oil saw a marginal dip of 5 cents to $83.69 a barrel.
The ongoing strife between Israel and Hamas in the Gaza Strip has prompted international efforts to secure a ceasefire for humanitarian aid delivery to Palestinian civilians.
Simultaneously, leaders from the United States and Saudi Arabia are engaged in discussions aimed at preventing the conflict from spreading to include major oil producer Iran.
In Europe, recent data reflecting manufacturing and service sector activity raises concerns over the continent’s economic health, potentially dampening oil demand.
John Evans, an oil broker at PVM, observed that these indicators challenge the notion that oil will remain insulated from seasonal demand fluctuations this winter in the Northern Hemisphere.
As for brighter prospects, China, the world’s largest oil importer, approved a substantial sovereign bond issuance, which could boost the economy.
However, China has also capped its oil refining capacity by 2025 to mitigate carbon emissions, which could temper crude oil demand.
On the supply side, falling U.S. crude oil stockpiles are lending support to oil prices. Unexpectedly, U.S. inventories shrank by approximately 2.7 million barrels in the week ending October 20, defying expectations of an increase.
As global tensions and economic dynamics continue to evolve, the energy markets remain in a state of flux, with multiple factors shaping the trajectory of oil prices.