Early assessments of oil prices on Friday, October 6 have shown that Brent crude was trading at $84.21 per barrel around 6:17 AM (GMT+1). Despite a modest increase on Friday, Reuters reports that oil prices are poised for their most substantial weekly drop since March.
The surge in oil prices on Friday was accompanied by growing concerns triggered by a sell-off in the United States bond market. This event has raised alarms about the possibility of a global economic slowdown and a potential decrease in fuel demand.
As of 0358 GMT on Friday, Brent futures were up 26 cents, or 0.3%, at $84.33, while U.S. West Texas Intermediate crude futures were up 28 cents, or 0.3%, at $82.59, partially recovering from a 2% decline on Thursday. Analysts are closely monitoring this situation.
Edward Moya, an analyst at OANDA, commented on the situation, saying, “Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries. The worst week for crude since March is starting to attract buyers given the oil market will still remain tight over the short-term.”
This sharp increase in oil prices follows a significant surge seen on September 28 when Brent crude reached a peak of $97.24 per barrel, a level not seen since November 2022. This price surge was driven by increased demand and a noticeable reduction in global crude oil supply.
Saudi Arabia and Russia played a vital role in this surge by declaring oil production cuts to last until the end of 2023, with monthly evaluations to assess market conditions. Following the recent OPEC+ ministerial panel meeting on October 4, no changes were made to the consortium’s oil production strategy. Both Saudi Arabia and Russia reaffirmed their commitment to maintaining voluntary supply reductions to support the global oil market’s stability.
The decision not to modify output policies reflects the collaborative approach of OPEC+ members who understand the importance of a balanced and predictable oil market for both producers and consumers.
However, analysts at Rystad Energy have expressed skepticism about the long-term effectiveness of OPEC’s strategy, claiming that oil demand has peaked. They predict that global crude oil prices could drop to around $60 per barrel by 2027 as demand growth slows.
The International Energy Agency (IEA) also suggested in September 2023 that fossil fuel demand would peak before 2030, signaling a shift in the global energy landscape away from fossil fuels.
In the Nigerian context, the country’s oil and gas industry is still grappling with the repercussions of global crude price increases. The National President of the Natural Oil and Gas Suppliers Association of Nigeria, Bennett Korie, revealed during a National Executive Council meeting that Nigerian depots are running out of petroleum products due to increased landing costs, which have risen to N720 per litre.
Depot owners are struggling with the escalating costs of crude oil and volatile exchange rates. Obtaining bank loans to sustain operations has become challenging due to exorbitant interest rates.
This situation has left many depots empty, affecting filling stations and leading to financial difficulties for independent and major marketers alike. It casts a dark shadow over the entire petroleum distribution industry in Nigeria.
As oil prices continue to fluctuate amid global economic uncertainties, stakeholders in the energy industry worldwide are closely monitoring developments, with hopes of achieving market stability while adapting to changing dynamics.