Oil Prices Face Downward Pressure Amid OPEC+ Uncertainty and Middle East Tensions

Oil prices find themselves caught in the crossfire of geopolitical tensions and the aftermath of the recent OPEC+ decision on Monday.

Brent crude oil, against which Nigeran oil is priced, shed 0.9% or 73 cents settled at $78.15 per barrel at about 7 am Nigerian time while the U.S. West Texas Intermediate crude oil experienced an 0.8% decline or 64 cents to $73.43 a barrel.

“Crude seems to be under continued pressure from the OPEC+ decision. Some degree of discounting of the deeper OPEC+ cuts is justified, but as of now, the crude complex has completely disregarded them,” stated Vandana Hari, the founder of Vanda Insights, an oil market analysis provider.

Last week, oil prices suffered a slump of over 2%, fueled by investor skepticism regarding the depth of supply cuts committed to by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

Lingering concerns about sluggish global manufacturing activity added to the pessimism.

The OPEC+ cuts, declared as voluntary on Thursday, have raised doubts about the full implementation of the proposed reductions and left investors questioning the metrics for measurement.

As the global focus shifts to the Middle East, geopolitical tensions resurface with renewed hostilities in Gaza.

Against this backdrop, three commercial vessels faced attacks in international waters in the southern Red Sea, leading to heightened concerns over potential supply disruptions.

While the resumption of the Israel-Hamas conflict injected a bullish momentum into oil prices, analysts, including CMC Markets’ Tina Teng, remain cautious.

“However, oil prices may continue to be under pressure for the time being due to China’s disappointing economic recovery and the ramp-up of U.S. production”, Teng stated.

Amid this intricate web of challenges, the specter of additional sanctions on Russia and a potential pause in sanctions relief for OPEC member Venezuela by the White House further add layers of complexity to the already delicate global oil market.

As the world watches, uncertainties persist, shaping the future trajectory of oil prices in an intricate dance of geopolitics and market dynamics.