In a volatile trading session on Monday, crude oil prices extended their losses as fears of a recession in the United States and concerns about rising output from the Organization of the Petroleum Exporting Countries (OPEC).
Brent crude oil, against which Nigerian oil is priced, fell 53 cents, or 0.7%, to $76.28 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 57 cents, or 0.6% to $72.95.
Both benchmarks had already tumbled over 3% on Friday, marking their fourth consecutive week of losses—the longest losing streak since November.
The latest downturn in oil prices comes as investors react to weak economic data from the U.S., the world’s largest oil consumer.
A disappointing July payroll report has stoked recession fears, further exacerbating concerns about declining Chinese demand, particularly for diesel, a key driver of global oil consumption growth.
ING analysts led by Warren Patterson noted that U.S. recession fears “only add to Chinese demand concerns that have been lingering in the oil market for some time.”
Adding to the downward pressure on oil prices, the OPEC+ group of producers announced plans to phase out voluntary output cuts from October, signaling an increase in supply later this year.
According to a Reuters survey, OPEC’s oil output rose in July despite ongoing production cuts by the group.
Analysts suggest that the decision to stick to the planned increase in output reflects OPEC’s confidence in managing the market, although it may weigh on prices in the short term.
Geopolitical tensions in the Middle East have provided some support for oil prices, capping further losses. Fighting in Gaza continued on Sunday, following an unsuccessful round of ceasefire talks in Cairo.
The region’s stability remains precarious, with Israel and the United States bracing for potential escalation after Iran and its allies Hamas and Hezbollah pledged retaliation for recent killings of key figures.
Tony Sycamore, a market analyst at IG, commented, “The risk of a wider regional war, while I still think is small, can’t be ignored.”
Investors are also keeping an eye on upcoming U.S. services data, which will offer further insights into the health of the American economy.
Sydney-based analyst Sycamore noted, “Another fall tonight and it supports the idea the Fed is behind the curve,” referring to the potential delays in interest rate cuts by the U.S. Federal Reserve.
Despite the challenges, the oil market remains sensitive to a range of factors, including economic data, geopolitical developments, and OPEC’s production strategies.
