Global oil prices appreciated slightly on Monday during the Asian trading session, following last week’s interest rate cut in the United States and a decline in crude oil inventories.

Brent crude oil, against which Nigerian crude oil is priced, appreciated by 14 cents, or 0.19%, to $74.63 per barrel, while U.S. West Texas Intermediate (WTI) crude oil gained 16 cents, or 0.23%, to $71.16 per barrel.

Both crude oils traded higher last week after the U.S. Federal Reserve cut interest rates by half a percentage point.

“Oil looks rangebound despite the uplift to risky asset prices from an outsized policy rate cut by the Fed last week,” said Harry Tchilinguirian, head of research at Onyx Capital Group.

“The market will look to flash purchasing managers’ index (PMI) releases in Europe and the U.S. for economic direction, and if these disappoint, then there is likely to be downward pressure developing on oil prices.”

In the Euro area, a recent survey showed business activity declined due to stagnant growth in the services industry and a slowing manufacturing sector.

Meanwhile, China’s economic outlook remained subdued with growth continuing to lag.

“There was some hope earlier this morning that additional Chinese monetary stimulus might be likely in the short term, but the latest PMI data out of Europe shifted market sentiment from positive to negative,” said UBS analyst Giovanni Staunovo.

“I would expect oil to benefit this week from a large U.S. crude draw as a result of elevated U.S. crude exports.”

However, heightened conflict in the Middle East could limit regional supply.

The Israeli military launched its most widespread wave of airstrikes against Iran-backed Hezbollah, targeting southern Lebanon, the eastern Bekaa Valley, and the northern region near Syria simultaneously after nearly a year of conflict.

“Geopolitical tensions in the Middle East have edged up between Israel and Hezbollah, which could leave oil prices well supported on the risks of a wider regional conflict,” said IG market strategist Yeap Jun Rong.

Crude gained on Tuesday following Hurricane Francine disruption in the U.S. and the possibility of an interest rate cut in the U.S.

These two factors have boosted traders’ sentiment in the oil market despite concerns about global demand and slowing growth in China.

Brent crude oil, against which Nigerian oil is priced, rose by 36 cents, or 0.5% to $73.11 per barrel while the U.S. crude oil gained 53 cents, or 0.8% to settle $70.62 per barrel.

Both closed higher in the previous trading session as the market reacted to the impact of Hurricane Francine on U.S. Gulf Coast production.

More than 12% of crude oil production and 16% of natural gas output in the Gulf of Mexico remained offline as of Monday, according to the U.S.

According to the Bureau of Safety and Environmental Enforcement (BSEE), the disruption has raised concerns over short-term supply shortages and contribution to the upward momentum in prices.

Yeap Jun Rong, a market strategist at IG said “while the market is seeing near-term stabilization, the fragile state of China’s economy and anticipation of the U.S. Federal Reserve’s interest rate decision could limit further gains.”

The Federal Open Market Committee (FOMC) is expected to announce a rate cut later this week, with futures markets pricing in a 69% chance of a 50-basis-point reduction.

Lower interest rates are favourable for oil prices as they reduce borrowing costs and encourage economic growth.

“Growing expectations of an aggressive rate cut are lifting sentiment across the commodities sector”, stated ANZ analysts.

The market, however, remains cautious due to lower-than-expected demand from China, the world’s largest importer of the commodity.

Chinese data released over the weekend showed that China’s oil refinery output dropped for the fifth consecutive month in August. This signals weaker domestic demand and declining export margins.

Hopes for cheaper Premium Motor Spirit (PM), otherwise known as petrol, rose, last night, as indications emerged that the product may sell for between N857 and N865 per litre after the Nigerian National Petroleum Corporation Limited (NNPCL) starts lifting the product from Dangote Refinery today.

It was learnt that the NNPCL, as the sole off-taker of petrol from the refinery, is projected to lift the product at N960/N980 per litre and sell to marketers at N840/N850 to enable Nigerians to get it at between N857 and N865 at the pump at filling stations.

However, whether uniform product prices would apply at filling stations nationwide was unclear.

As of yesterday, petrol sold at N855 per litre at NNPCL retail stations in Lagos and it was the cheapest anyone could buy the product while major marketers sold around N920.

At independent marketers’ outlets, the price was over N1,000. Elsewhere across the country, PMS sold for more than N1,200 per litre.

Sources said the new arrangement from the NNPCL and Dangote Refinery negotiations, spanning more than one week, would allow Nigerians to get petrol at between N857 and N865 per litre and represents an average under-recovery of about N130 to NNPCL.

President Bola Tinubu, Sunday Vanguard was made to understand by a Presidency source, made it clear to the negotiating parties that “the price at which petrol would be sold to Nigerians should not be such that would place heavy financial burden on them while dealing with the new reality of the prevailing price”.

The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, has, meanwhile, expressed optimism that the deal would reduce the pressure on foreign exchange (FX) demands and shore up the value of the Naira – presently, between 30% and 40% of FX demands go into the importation of PMS.

Chief Corporate Communications Officer, NNPC Ltd., Olufemi Soneye, who confirmed the readiness of the company to start lifting petrol today, told Sunday Vanguard, yesterday: “NNPC Ltd has started deploying our trucks and vessels to the Dangote Refinery to lift PMS in preparation for the scheduled lifting date of September 15th, as set by the refinery.

“Our trucks and personnel are already on-site, ready to begin lifting. We expect more trucks, and the deployment will continue throughout the weekend so we can start loading as soon as the refinery begins operations on September 15, 2024.”

Soneye hinted that at least 100 trucks had already arrived at the refinery for the petrol lifting, adding that the number of trucks could increase to 300 by Saturday evening.

On his part, Executive Secretary, of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, said: “We have been lifting diesel (AGO) and aviation fuel (jet fuel) and we look forward to lifting petrol (PMS).”

On pricing, he said: “We await clarity in respect of the pricing mode, and once that is clarified, we’ll do the needful towards meeting the energy needs of Nigerians.”

Yesterday, Edun, the Minister of Finance and Coordinating Minister of the Economy said the structuring of the NNPCL, Dangote Refinery deal in Naira would assist in reducing pressure on the local currency.