Oil prices surged during Asian trading hours on Wednesday amid mounting expectations that major oil-producing nations will uphold output cuts at an impending meeting of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.
Brent crude oil, against which Nigerian oil is priced, gained 18 cents, or 0.2% to $84.40 per barrel while the U.S. West Texas Intermediate (WTI) rose by 28 cents, or 0.3%, to $80.11.
The anticipation gripping traders and analysts alike centers on OPEC+ sustaining voluntary production cuts, which currently total about 2.2 million barrels per day.
Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, underscored the significance of this move, asserting that it would be perceived as a concerted effort to stabilize prices and rebalance the global oil market.
Sachdeva further elaborated on the factors bolstering oil prices, noting, “The onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices.”
As the Memorial Day holiday heralds the commencement of the peak demand season in the United States, the world’s foremost oil consumer, the decision to maintain production cuts is poised to lend support to prices as consumption surges.
Daniel Hynes, senior commodity strategist at ANZ Bank, remarked on the robust holiday travel activity witnessed in the U.S., both on roads and in the air.
However, amidst the optimism surrounding the OPEC+ meeting, concerns over heightened tensions in the Gaza Strip added a geopolitical dimension to market dynamics.
Israeli tank advancements into the heart of the Rafah section fueled apprehensions about a potential escalation of conflict in the broader Middle East, a region critical to global oil supply.
Market participants also awaited the release of U.S. crude inventory data from the American Petroleum Institute later in the day, with preliminary expectations suggesting a decline of approximately 1.9 million barrels for the previous week.
Additionally, investor attention was drawn to forthcoming U.S. inflation data, set to influence expectations regarding Federal Reserve interest rate decisions and, consequently, impact oil prices.
The U.S. core Personal Consumption Expenditures Price Index report for April, scheduled for release on Friday, is projected to hold steady on a monthly basis.
Against this backdrop of anticipation and geopolitical tensions, the oil market navigates a landscape shaped by supply dynamics, demand prospects, and macroeconomic indicators, all of which converge to define the trajectory of oil prices in the coming days.
