Brent crude oil, against which Nigerian oil is priced, gained 18 cents to settle at $76.07 a barrel in the early hours of Wednesday.
The slight uptick follows a week marked by sharp moves influenced by concerns about the U.S. economy and persistent nervousness regarding the impact of tensions in the Red Sea.
Throughout the week, oil prices experienced notable fluctuations, initially surging by around $2 in response to attacks on vessels in the Red Sea by Houthi rebels.
The situation escalated as the U.S. Central Command confirmed the firing of two anti-ship ballistic missiles into the Southern Red Sea on Tuesday.
Fortunately, no damage was reported, but the incident heightened concerns about potential disruptions to crucial oil transportation waterways and trade flows.
“The nervousness is conspicuous,” remarked Tamas Varga, an oil broker at PVM, acknowledging the jittery sentiment prevailing in the market despite the fact that oil supply remains unaffected.
Tuesday witnessed both Brent crude and U.S. West Texas Intermediate crude futures closing more than 1% down, reflecting a shift in optimism about early and aggressive U.S. interest rate cuts.
This sentiment waned ahead of the release of Federal Reserve meeting minutes and job data on Wednesday.
“The market bade farewell to 2023 with a considerable liquidation of length, and persisting anxiety about the geopolitical outlook failed to draw buyers back to the fore as the new year has kicked off,” added Varga, encapsulating the cautious stance prevalent in the market.
Amidst the Red Sea tensions, Israeli forces intensified their bombing of the Gaza Strip, extending the geopolitical uncertainties. The killing of Hamas’ deputy leader in Beirut further added to the geopolitical complexities in the region.
Looking ahead, expectations of ample oil supply in the first half of 2024 have tempered prices, with a focus on the upcoming OPEC+ plans.
The Joint Ministerial Monitoring Committee (JMMC) is scheduled to convene in early February, although an exact date is yet to be decided.
OANDA analyst Craig Erlam emphasized that the market’s attention is likely to shift back to the demand side, scrutinizing whether central banks can successfully orchestrate the soft landing they have aimed for.
“As the new year unfolds, any outperformance for the global economy would ease the burden on OPEC+ at a time when compliance with quotas looks like it’s going to be a struggle,” Erlam noted.
The looming question remains: can oil markets navigate the complex geopolitical landscape and find stability in the face of shifting economic dynamics? The answer, perhaps, lies in the intricate interplay of global events and market forces as the year unfolds.