Oil prices rose on Tuesday amidst escalating tensions in the Middle East, driven by concerns over potential disruptions in supply.
However, gains were tempered by lingering uncertainty surrounding the trajectory of U.S. interest rates and their subsequent impact on fuel demand.
Brent crude oil, against which Nigerian oil is priced, saw a modest increase of 31 cents or 0.4% to $82.31 per barrel, while U.S. West Texas Intermediate (WTI) crude rose by 36 cents, or 0.5% to settle at $77.28 a barrel.
This uptrend followed a relatively stagnant performance in Monday’s trading session, which came on the heels of a 6% surge in oil prices during the previous week.
The persisting conflict in the Middle East played a significant role in maintaining elevated oil prices.
Yemen’s Iran-aligned Houthis heightened tensions by launching two missiles at an Iran-bound cargo ship in the Red Sea.
These actions, coupled with previous attacks on international vessels, intensified concerns about supply disruptions in the region.
While geopolitical factors fueled oil price gains, apprehensions about U.S. interest rates cast a shadow over market optimism.
The New York Fed’s January Survey of Consumer Expectations revealed stagnant outlooks for inflation, remaining above the Fed’s 2% target rate.
Any delay in interest rate cuts due to inflation concerns could potentially dampen oil demand by slowing economic growth.
Market participants eagerly awaited key data releases, including U.S. inflation figures and British and euro zone economic indicators.
Also, industry data on U.S. crude inventories and the release of OPEC’s monthly oil market report were anticipated, providing further insight into supply dynamics.
Looking ahead, the decision by OPEC+ in March regarding the extension of voluntary oil production cuts will be closely monitored, with implications for oil market balance in the coming months.
