Oil prices rebounded on Thursday despite signals from the U.S. Federal Reserve indicating a potential prolongation of higher interest rates.
Brent crude oil, against which Nigeria oil is priced, surged by 55 cents or 0.6% to $86.50 a barrel while U.S. West Texas Intermediate oil climbed by 47 cents to $81.74 a barrel.
The rally in oil prices came on the heels of a report from the U.S. Energy Information Administration (EIA) revealing a consecutive decline in crude inventories for the world’s largest oil consumer, the United States.
Crude stockpiles unexpectedly dropped by 2 million barrels to 445 million barrels in the week ending March 15, contrary to analysts’ projections of a minor increase.
This decline was attributed to heightened exports and increased refining activities.
Despite the Federal Reserve’s decision to maintain interest rates within the range of 5.25% to 5.50%, policymakers hinted at a more restrained outlook for rate cuts throughout the year.
This outlook, signaling potentially prolonged higher borrowing costs, initially sparked concerns about reduced economic growth and future fuel demand.
However, the oil market remained buoyant as ongoing geopolitical tensions, particularly related to Ukrainian attacks on Russian refineries, continued to underpin prices.
Analysts underscored the significance of supply-side disruptions, emphasizing the impact of Ukrainian drone strikes on Russian oil infrastructure, which have resulted in the shutdown of approximately 7% of Russian refining capacity.
Prolonged disruptions could compel Russian producers to reduce supply, further tightening the global oil market amidst ongoing production cutbacks from OPEC.
Despite the mixed signals from the Federal Reserve, oil prices demonstrated resilience, supported by a combination of supply concerns and inventory dynamics.
