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Global Economic Slowdown Pressures Oil Prices Despite Mideast Geopolitical Risks

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Oil prices remained steady on Friday but are set for their fourth consecutive weekly decline as concerns over weak global fuel demand overshadow fears of supply disruptions in the Middle East.

Brent crude oil, against which Nigerian oil is priced, saw a modest increase of 18 cents, or 0.2% to settle at $79.70 a barrel, while U.S. West Texas Intermediate (WTI) crude oil rose by 16 cents, or 0.2%, to $76.47 a barrel.

Despite these slight gains, both benchmarks have experienced losses exceeding 7% over the past four weeks, marking the longest streak of weekly declines this year.

Economic Concerns Weigh Heavily

Analysts attribute the persistent downward pressure on oil prices to lackluster economic growth in major economies, which could dampen oil demand.

“Weak economic growth in major economies could stifle oil demand despite increased tensions in the Middle East that could impact supplies,” commented Panmure Liberum analyst Ashley Kelty.

Economic data from China, the world’s top oil importer, and a survey indicating weaker manufacturing activity across Asia, Europe, and the United States, have heightened fears of a sluggish global economic recovery.

This concern is expected to weigh heavily on oil consumption moving forward. Additionally, falling manufacturing activity in China has further inhibited prices, with June data showing imports and refinery activity lower than the previous year.

Decline in Asian Oil Imports

Data from LSEG Oil Research highlighted that Asia’s crude oil imports in July fell to their lowest level in two years, driven by weak demand in both China and India. This reduction in imports has compounded concerns about global demand growth.

OPEC+ Stance Unchanged

On Thursday, an OPEC+ meeting concluded with the group deciding to keep its oil output policy unchanged. This includes a plan to begin unwinding one layer of production cuts from October.

“Crude futures were marginally higher early Friday … as demand concerns continued to tip the balance against supply worries stoked by a surge in Mideast geopolitical tensions,” said Vandana Hari, founder of analysis provider Vanda Insights.

Middle East Tensions

Despite the demand concerns, oil investors remain vigilant regarding developments in the Middle East. The recent killing of senior leaders from Iran-aligned militant groups Hamas and Hezbollah has stoked fears of potential all-out war in the region, which could threaten oil supplies.

Lebanon’s Iran-backed group Hezbollah announced that its conflict with Israel had entered a new phase and pledged a response following the death of its top military commander in an Israeli strike.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Rivers State Governor Refutes Claims of NNPCL Shutdown, Labels Report as ‘Propaganda’

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The Governor of Rivers State, Siminalayi Fubara has denied shutting down the Nigerian National Petroleum Company Limited (NNPCL), and other oil companies in the state as retaliation to a Federal High Court’s ruling barring the release of allocations to the state as widely reported.

Shortly after the court’s ruling, a report claiming that Fubara had ordered the immediate closure of NNPC and other oil companies in the oil rich state emerged on social media.

The report alleged that the Rivers State Governor declared that if the government fails to reverse the court ruling, there will be no oil for the country from Rivers.

Reacting to the allegation via a statement signed by the Commissioner for Information and Communications, Warisenibo Joe Johnson, the Rivers government said the report is not only false but a concocted propaganda from the enemies of the state.

The government urged Rivers people to ignore the report, adding that Fubara is committed to the rule of law and does not rely on unconventional and crude approaches to respond to matters of governance.

The statement reads, “The attention of Rivers State Government has been drawn to a spurious news item circulating on social media on “Gov. Siminalayi Fubara shutting down NNPCL and all oil companies in Rivers State”.

“The report was not only false, but a concocted propaganda from the imagination of the author and enemies of the State. The story was also circulated by an inconsequential and unverified medium

“Governor Siminalayi Fubara is committed to the rule of law and does not rely on unconventional and crude approaches to respond to matters of governance.

“We therefore enjoin Rivers people and well-meaning Nigerians to discountenance the spurious and fake report as Governor Fubara at no time contemplated and/or directed such needless order of shutting down the economy for any reason.”

Investors King reported that a Federal High Court in Abuja on Wednesday, restrained the Central Bank of Nigeria (CBN) from releasing monthly allocations to the Rivers State Government.

The judge, Joyce Abdulmalik, in a judgement, held that the receipt and disbursement of monthly allocations since January 2024 by Governor Siminalayi Fubara of Rivers State is a constitutional somersault and aberration that must not be allowed to continue.

Abdulmalik submitted that the presentation of the 2024 budget by Fubara before a four-member Rivers State House of Assembly was an affront to the constitutional provision.

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Possible Iran Attack on Israel Boost Oil Prices

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Oil prices recorded a rise in the international market on reports that Iran is preparing to attack Israel again, adding to tensions in the Middle East.

Brent crude rose by $2.10 or 2.91 percent to $74.26 while the US West Texas Intermediate (WTI)  jumped $2.15 or 3.13 percent to $70.76.

Iran is preparing to attack Israel from Iraqi territory in the coming days, possibly before the US presidential election on November 5.

The attack is expected to be carried out from Iraq using a large number of drones and ballistic missiles as attacking through pro-Iran militias in Iraq could be an attempt by Iran to avoid another Israeli attack against strategic targets in the country.

Israel and Iran have engaged in a series of military strikes, part of broader Middle East warfare set off by fighting in Gaza.

Iran had said it would use all available tools to respond to strikes carried out by Israel after Israel’s military jets struck missile factories and other sites near Tehran and in western Iran in retaliation for the country’s October 1 barrage of more than 200 missiles against Israel.

This renewed tension raises worries for the market as Iran is a member of the Organisation of the Petroleum Exporting Countries (OPEC) with production of around 3.2 million barrels per day or 3 per cent of global output.

There were worries that Israel could target Iran’s nuclear facilities but it only attacked just military targets near energy facilities and that eased earlier this week. Now, another retaliation could create provocation that would see them attack the infrastructure.

Market analysts noted that damage to air defences on Iran’s energy infrastructure has increased their vulnerability to future attacks.

Prices also continued to gain on reports that OPEC could delay its planned oil output increase as the wider OPEC+ is scheduled to meet on December 1 to decide its next policy steps.

Meanwhile, in China, the world’s biggest oil importer, manufacturing activity expanded in October for the first time in six months, suggesting stimulus measures are having an effect.

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Oil Prices Rise 2% on Positive Crude Inventories Data, Tight Supply Expectations

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Crude oil gains

Oil prices rose more than 2 percent on Wednesday after data showed crude and inventories fell unexpectedly last week and reports that the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ may delay a planned oil output increase.

Brent crude futures settled up $1.43, or 2.01 percent, at $72.55 a barrel and the US West Texas Intermediate (WTI) crude rose $1.4, or 2.08 percent to $68.61.

The US Energy Information Administration (EIA) reported an inventory draw of a modest half a million barrels for the week to October 25.

The change in oil stocks compared with a build of 5.5 million barrels for the previous week, pressured oil prices at the time.

The American Petroleum Institute (API), meanwhile, on Tuesday reported estimated inventory draws across crude and fuels, helping prices move higher for a time. However, they remained subdued due to expectations of a ceasefire in the Middle East.

The country’s petrol stocks shed 2.7 million barrels in the week to October 25, with production at an average of 9.7 million barrels daily. These figures compared with an inventory build of 900,000 barrels for the previous week, when production stood at an average of 10 million barrels daily.

Pressure also came as the market learned that OPEC+ could delay a planned oil production increase in December by a month or more because of concern over soft oil demand and rising supply.

Traders are betting that OPEC+ will hold off on the planned increase, deferring to Saudi Arabia’s top-down approach since the country acts as the de facto leader of the group and has always stepped in to help the alliance when it is underperforming.

The group is scheduled to raise output by 180,000 barrels per day in December. OPEC+ has cut output by 5.86 million barrels per day, equivalent to about 5.7 per cent of global oil demand.

OPEC Monthly Oil Market Report downgraded demand growth for 2024 to 1.9 million barrels per day while demand forecasts for 2025 slipped another 102,000 barrels per day to 1.6 million barrels per day.

China, meanwhile, ramped up imports by 16 per cent month over month in August, but the rise still falls short of August 2023 levels, keeping a lid on demand and by extension, the market.

OPEC+ is scheduled to meet on December 1 to decide its next policy steps.

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