During the Asian trading session on Friday, oil prices sustained their upward increase to set the stage for a third consecutive weekly gain.

This rise is fueled by growing optimism that the U.S. Federal Reserve will soon begin cutting interest rates and improving refining margins.

Brent crude oil, against which Nigerian oil is priced, saw an increase of 48 cents, or 0.56% to settle at $86.87 a barrel.

The U.S. West Texas Intermediate (WTI) crude oil gained 52 cents, or 0.64% to settle at $82.26 a barrel.

This positive trend persists despite unexpected increases in U.S. crude inventories, which had been anticipated to decline during the peak summer demand period.

“Crude oil edged higher despite weak near-term fundamentals,” commented ANZ analysts. They attributed the price rise to a broader market risk-on tone, triggered by data signaling further weaknesses in the U.S. labor market.

The market’s optimism has been further buoyed by rising expectations of an imminent Federal Reserve easing cycle.

Traders are now pricing in a 64% chance of a rate cut by September, up from 50% just a month ago, according to the CME FedWatch tool.

Lower interest rates could potentially stimulate oil demand by reducing borrowing costs for consumers.

The recovery in physical refining margins has also supported the oil markets. The Singapore complex refining margins have averaged $1 higher in June compared to May, standing at around $3.60 a barrel.

Ivan Mathews, head of Asia refining at FGE, said, “Heading to Q3, we expect refining margins to remain around current levels. We anticipate gasoline prices to continue rising through August, offset by easing diesel cracks amid lengthening East of Suez balances.”

Despite the overall positive sentiment, market analysts are cautious about several downside risks. Fluctuations in the U.S. dollar, which is at a two-month high, and political uncertainty in France could impact oil demand.

Kelvin Wong, a senior market analyst at OANDA, highlighted, “The downside risk factor at play is related to USD volatility, bearing in mind the U.S. core PCE inflation data due later today.”

Wong also noted that oil prices might face short-term profit-taking at the start of next week if the first-round results of the French legislative election on June 30 show lower public support for a far-right group advocating a halt to green energy development.

In a bid to unlock Nigeria’s vast but underutilized heavy crude oil reserves, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) convened a pivotal industry workshop in Abuja.

The event, attended by key stakeholders from the oil and gas sector, focused on strategizing ways to accelerate the development of the country’s heavy crude assets through collaborative efforts.

Mr. Gbenga Komolafe, CEO of NUPRC, underscored the urgency and potential of Nigeria’s heavy crude reserves, which stand at approximately 1.6 billion barrels, with only a mere 5% currently developed.

Addressing participants, Komolafe said there is a need for a paradigm shift from traditional approaches to a more integrated and collaborative model involving all industry players.

“Heavy crude oil presents a significant opportunity for Nigeria’s energy sector,” Komolafe stated during his keynote speech themed “Entrenching Accelerated Development of Petroleum Prospecting Licenses (PPL) Assets and Heavy Crude Reserves Through Strategic Partnerships with Technology Drivers and Industry Service Providers.”

He highlighted the distribution of these reserves across different terrains and ownership structures, with a substantial portion located in onshore acreages.

Despite the challenges posed by the high viscosity and sulfur content of heavy crude, Komolafe expressed confidence that with the right technological innovations and collaborative frameworks, Nigeria can effectively harness these resources.

The workshop, a platform for intensive dialogue and knowledge-sharing, also addressed the regulatory frameworks introduced under the Petroleum Industry Act (PIA) of 2021.

This legislation aims to modernize the upstream oil and gas sector, streamline licensing processes, and attract new investments.

Participants discussed practical steps to enhance operational efficiency, ensure regulatory compliance, and foster sustainable development practices within the sector.

The event concluded with a commitment to implement agreed-upon best practices that prioritize efficiency, transparency, and environmental sustainability.

Brent crude oil prices edged closer to $86 per barrel as heightened expectations of a robust demand surge during the third quarter of the year.

This upward momentum comes amidst forecasts of an eventual drawdown in inventory levels and escalating geopolitical tensions in the Middle East.

As of Wednesday, Brent crude oil rose by 63 cents, or 0.7% to $85.64 a barrel, while the U.S. West Texas Intermediate (WTI) crude oil climbed 74 cents, or 0.9%, to $81.57.

“The ubiquitous view is that demand will increase during the summer,” remarked Tamas Varga, an oil broker at PVM. “Geopolitics is still seen as a supportive element of the equation.”

Despite a stronger dollar, which typically makes dollar-priced oil more expensive for buyers holding other currencies, the market remained resilient.

The dollar index was up 0.18%, underscoring currency strength amid expectations of potential rate cuts by the end of the year.

Analysts and industry experts pointed to anticipations of significant inventory drawdowns during the peak third quarter demand season as a key factor bolstering current prices.

The American Petroleum Institute (API) had earlier reported a modest increase in U.S. crude oil stocks, but market sources anticipate a substantial decline of nearly 3 million barrels in official inventory data expected later in the day from the Energy Information Administration (EIA).

“Suvro Sarkar, energy sector team lead at DBS Bank, noted, “It seems the market is shrugging off demand concerns for now, anticipating inventory drawdowns in peak third quarter demand season.”

Furthermore, strength in front-month oil prices indicated robust physical demand, a positive sign for near-term price stability and market buoyancy.

Analysts from JP Morgan highlighted in a client note that key indicators in the oil market are signaling a rebound supported by a stronger underlying physical market.

Geopolitical tensions also played a significant role in boosting oil prices. Recent incidents, including Houthi attacks on shipping in the Red Sea and escalating hostilities between Israel and Hezbollah in Lebanon, added to market uncertainties and contributed to bullish sentiments.

“The Houthis have so far sunk two vessels and seized another, and said on Tuesday they used a missile to hit a vessel in the Arabian Sea,” Sarkar explained, emphasizing the geopolitical risks influencing oil price dynamics.

As Brent crude approaches the $86 mark, attention remains focused on ongoing geopolitical developments, inventory data releases, and global economic indicators that could continue to sway oil market movements in the coming weeks.