Oil prices experienced a downturn, extending losses from the previous session as the U.S. dollar surged against global counterparts to impact market sentiment.
Brent crude oil, against which Nigerian oil is priced, slipped by 0.2% to $81.48 a barrel while U.S. West Texas Intermediate crude (WTI) declined by 0.3% to $76.27 a barrel.
The upward trajectory of the dollar renders oil more costly for holders of other currencies, contributing to the decline in oil prices.
This downward trend follows a week of losses, with Brent declining approximately 2% and WTI falling over 3%.
Market participants attribute these fluctuations to concerns about inflation potentially delaying anticipated cuts to high U.S. interest rates. Such expectations have been suppressing global fuel demand growth.
Analysts observe a retreat in the risk-on sentiment, coinciding with heightened expectations of prolonged interest rates.
Tina Teng, an independent analyst based in Auckland, notes that the recent market rally led by Nvidia has stalled, as elevated rate expectations bolster the U.S. dollar, thereby pressuring commodity prices, including oil.
Despite geopolitical tensions such as the Israel-Hamas conflict and attacks on ships in the Red Sea, which could have traditionally boosted oil prices, the impact remains modest.
Moreover, investors are monitoring developments surrounding Russian oil supply following recent U.S. sanctions on Moscow’s leading tanker group.
Amidst these uncertainties, Qatar’s decision to increase liquefied natural gas production further adds to global energy supplies.