Oil prices experienced a notable surge, reaching a one-month high as several global factors contributed to the bullish market sentiment.
West Texas Intermediate (WTI) climbed above $75 a barrel, its highest level since December 26 while Brent crude oil, against which Nigerian oil is priced, surpassed $80.
This upswing followed an unexpected and substantial decline in US inventories, providing a boost to the energy market.
US inventories plummeted by more than 9 million barrels in the past week, a staggering six times more than initial forecasts.
This drastic reduction brought inventories to their lowest level since October, creating a bullish atmosphere for oil prices.
The unexpected drop was attributed, in part, to unusually cold weather disrupting production.
Simultaneously, China, the world’s largest crude importer, announced additional stimulus measures.
The government revealed plans to reduce the reserve-requirement ratio for banks within two weeks, hinting at potential further support measures.
This move further fueled optimism regarding energy consumption in China, reinforcing the positive outlook for oil demand.
Despite geopolitical tensions in the Red Sea impacting global trade, the oil market’s struggle to break out of a narrow range may be influenced by concerns over continued robust crude supply growth from non-OPEC producers.
While the US navy intercepted attacks on two container ships fired by Iran-backed Houthi rebels in Yemen, the broader landscape suggests a potential range-bound oil market until there is more clarity on the global growth outlook.
Analysts acknowledge the recent bullish developments but remain cautious, recognizing the potential transient nature of the US inventory drop due to abnormal weather conditions.
The oil market’s trajectory may hinge on resolving uncertainties related to global growth and navigating geopolitical risks in key oil-producing regions.
