Global oil prices declined slightly on Wednesday as concerns over the slowing global economy outweighed supply cuts by top crude oil exporters.
Brent crude oil, against which Nigerian crude oil is priced, decreased by 18 cents or 0.24% to $76.07 per barrel while the U.S. West Texas Intermediate crude oil gained slightly by $1.44 or 2.06% to $70.23 per barrel.
While the recent supply cuts announced by Saudi Arabia, the world’s largest crude exporter, and Russia were intended to bolster oil prices, the market failed to sustain its positive response to the announcement.
Saudi Arabia had volunteered to cut output by 1 million barrels per day (bpd) in August while Russia and Algeria announced their readiness to cut export levels by 500,000 bpd and 20,000 bpd, respectively.
“These measures are designed to push oil prices higher, but currently they are being pulled down by macroeconomic anxiety,” PVM analyst Tamas Varga said of the price impact from the supply cuts.
“Some would argue that the latest decision to supply less oil to the market is actually bearish because it can be viewed as an admission that demand is struggling to grow at a healthy clip due to global economic headwinds.”
Varga further emphasized that some analysts argue that the decision to supply less oil to the market might actually be viewed as bearish, signaling that demand is struggling to grow due to global economic headwinds.
The decrease in oil prices has led to some downward revisions in oil price forecasts by major financial institutions. Morgan Stanley, for instance, recently predicted a market surplus in the first half of 2024, driven by expectations of non-OPEC supply outpacing demand growth next year.
This downward revision further accentuates the concerns surrounding oil prices and the delicate balance between supply and demand.
Meanwhile, services activity expanded at the slowest pace in five months in China, the world’s largest importer of the commodity. While in the eurozone witnessed its dominant services sector slipping into contractionary territory last month.
