Oil prices experienced a downward trend as investor concerns intensified regarding the demand outlook that was fueled by reports of elevated producer prices in the United States.
Brent crude oil, against which Nigerian oil is priced, dropped by 55 cents or 0.7% decline to settle at $82.92 a barrel while the U.S. West Texas Intermediate crude fell by 41 cents to $78.78, a decrease of 0.5%.
Friday’s increase in geopolitical tensions in the Middle East had previously supported both Brent and WTI contracts, albeit the International Energy Agency’s downward revisions in demand forecasts tempered the optimism.
Investor sentiment turned bearish following the release of U.S. producer price index data for January, which surpassed expectations, particularly in service costs, amplifying concerns over inflation.
Market participants await China’s return to trading activity following its Lunar New Year holiday, while Presidents’ Day in the United States is expected to maintain subdued trading conditions.
Furthermore, Federal Reserve policymakers indicated a stance of “patience” towards interest rate adjustments, which could further elevate the cost of purchasing oil, thereby contributing to the downward pressure on prices.
Over the weekend, tensions persisted in the Middle East, with Israeli airstrikes impacting Gaza’s medical infrastructure, and Yemeni Houthi fighters claiming responsibility for an oil tanker attack.
Despite these developments, the Organization of the Petroleum Exporting Countries (OPEC) remains confident in its capacity to mitigate disruptions, boasting a spare capacity of 6.4 million barrels per day, the highest in eight years.
Also, the International Energy Agency warned of a potential market surplus in 2024, further exacerbating concerns over weakening demand.
The United Nations Security Council is anticipated to vote on an Algerian proposal for a humanitarian ceasefire in the Israel-Hamas conflict, while Russia’s assertion of control over the Ukrainian town of Avdiivka and the recent demise of prominent opposition figure Alexei Navalny add further geopolitical complexities that could impact oil markets.
