Oil prices rebounded in Asian trade after a more than 3% drop in the previous session as concerns over supply disruptions triggered by the Middle East conflict offset disappointing data from China.
Brent crude oil, against which Nigerian oil is priced, increased by 65 cents, or 0.74% to $88.10 a barrel. Meanwhile, the more actively traded January Brent crude futures rose 80 cents, or 0.91%, to $88.25 while the U.S. West Texas Intermediate crude also gain of 67 cents, or 0.81% to close at $82.98.
The decline in oil prices on the previous day was attributed to investor caution ahead of the U.S. Federal Reserve meeting scheduled for Wednesday, despite an escalation of Israel’s attacks on Gaza.
Concerns over supply disruption have risen, but as of now, Iran has only resorted to verbal deterrence, while Israel initiated and withdrew a ground attack.
The ING analysts highlighted that “disruptions to Iranian oil flows remain the most obvious risk to the market,” which could result in a loss of supply ranging between 500,000 and 1 million barrels per day if U.S. sanctions are strictly enforced.
However, Middle East developments have not yet impacted oil supply.
Furthermore, weaker-than-expected manufacturing and non-manufacturing data from China raised concerns about slowing fuel demand in the world’s second-largest oil consumer.
The Chinese official purchasing managers’ index fell below the 50-point level, suggesting contraction.
The ongoing situation in Venezuela, particularly the suspension of opposition presidential primary results by the Supreme Court, has also brought concerns regarding crude exports.
The U.S. had eased sanctions in exchange for promises of fairer elections in 2024, but this development could affect that agreement.
Market participants are closely monitoring the U.S. central bank meeting ending on Wednesday, anticipating the maintenance of steady interest rates despite the potential impact on the energy market.