In a cautious market, oil prices showed mixed movements in Asian trade on Tuesday.
Global benchmark Brent crude oil, against which Nigerian oil is priced, experienced a slight decline of 13 cents, or 0.15%, to settle at $84.12 per barrel.
Meanwhile, U.S. West Texas Intermediate (WTI) crude oil saw a modest increase of 14 cents, or 0.17% to $80.19 per barrel.
The recent fluctuations come after both benchmarks posted significant gains of around 2% on Monday, marking their highest closing prices since April.
The market’s attention has now shifted back to fundamental factors, which have exhibited signs of softness for some time.
Francisco Blanch, a commodity and derivatives strategist at Bank of America, noted in a client note that global crude oil inventories and refined product storage in key locations such as the United States and Singapore remain elevated.
“The oil market shifted its focus back to fundamentals, which have been soft for some time,” Blanch stated, highlighting the broader concerns about global demand growth.
Data from the first quarter of the year indicated a deceleration in global oil demand growth to 890,000 barrels per day year-on-year, with further slowing likely in the second quarter.
Also, according to the country’s statistics bureau, China’s oil refinery output fell by 1.8% year-on-year in May due to planned maintenance and higher crude costs.
Market participants are also keenly watching for further indications on interest rates and U.S. demand trends, with several U.S. Federal Reserve representatives scheduled to speak later on Tuesday.
Despite the mixed signals, some analysts remain optimistic about the impact of OPEC+ supply cuts.
Patricio Valdivieso, vice president and global lead of crude trading analysis at Rystad Energy, said, “The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025.”
Valdivieso further noted the disconnect between OPEC+’s demand outlook and those of other agencies, making it challenging to adopt a fully bearish stance on the market.
This sentiment has been reinforced by recent investor behavior, with hedge funds and other money managers purchasing the equivalent of 80 million barrels in key petroleum futures and options contracts over the week ending June 11.
Support for the market has also come from a rebound in refining margins, particularly in Europe and Asia.
Sparta Commodities analyst Neil Crosby pointed out that refining margins at a typical complex refinery in Singapore averaged $3.60 a barrel for June so far, up from $2.66 a barrel in May.
As the market navigates these dynamics, the cautious optimism among investors and analysts suggests a period of continued volatility and adjustment, with fundamental factors and policy decisions playing pivotal roles in shaping future price movements.
