Oil prices dipped on Wednesday as concerns over China’s economic performance and escalating tensions in the Middle East weighed on market sentiment.
Brent crude oil, against which Nigerian oil is priced, declined by 87 cents or 1.1% to settle at $82 a barrel while the U.S. West Texas Intermediate crude oil dropped 82 cents or 1.1% to $77 a barrel.
China, the world’s second-largest economy, reported its manufacturing activity contracted for the fourth consecutive month in January.
This ongoing struggle to regain economic momentum follows the recent court-ordered liquidation of China Evergrande, a move that has significantly impacted the real estate sector, which accounts for a quarter of China’s GDP.
Also, tensions in the Middle East, particularly the Israel-Hamas conflict escalating into a naval dispute between the United States and Iran-aligned Houthi militants in the Red Sea have fueled concerns about oil supply disruptions.
Despite disruptions to oil and natural gas tanker shipping, exacerbated delivery costs, and initial impacts on oil supplies, a Reuters poll suggests that record production in the West and sluggish economic growth may cap prices.
Analysts remain cautious about turning bullish on crude oil due to the persisting bearish technical picture and its failure to reflect recent geopolitical events, including a deadly drone attack on U.S. troops near the Jordan-Syria border.
The Houthi group’s announcement to continue attacks on U.S. and British warships in the Red Sea heightens fears of prolonged disruption to global trade while efforts for a ceasefire and release of hostages in Gaza continue amidst Israel’s offensive.
