In the global
commodity market, crude oil prices trended on bearish note amidst uncertainties
over demand outlook. The market prices of crude oil pullback despite recent
sanctions slammed on Venezuela by the United States (U.S).
International benchmark Brent crude traded at
$85.85 per barrel, down by 1.65per cent decline from the closing price of
$87.29 per barrel in the previous trading session.
The American
benchmark West Texas Intermediate (WTI) traded at $80.75 per barrel at the same
time, a 1.79per cent drop from the previous session that closed at $82.22 per
barrel. Following news of Israel carrying out a retaliatory attack on Iran,
both benchmarks surged on Friday.
The Brent crude
price approached the $91 threshold amid concerns that a wider conflict would
disrupt oil supplies in the Middle East, home to the majority of the world’s
oil reserves. However, later on Friday, crude prices clawed back most of the
gains after both sides downplayed the severity of the attack. I-G Mulls
Establishment of N100bn Police Housing Fund
As concerns of a
wider conflict eased despite unprecedented direct strikes by both sides, the
oil market refocused on market fundamentals on the first day of the new week.
Demand concerns
stemming from uncertainties regarding the global economy continue to weigh on
prices. Weak demand worries were also sparked by the rise in crude oil stocks
in the US, the largest oil consumer in the world.
While uncertainty
regarding the timing of the Fed’s interest rate cuts continues, the dollar
index reached 106. The rise in the value
of the US dollar makes oil expensive for buyers using other currencies, leading
to reduced purchases and downward pressure on prices.
Meanwhile, renewed
US sanctions on Venezuela, which has an export capacity of around 600,000
barrels per day, has fueled supply concerns. The OPEC+ group could influence
oil prices by returning some of the 2 million bpd supply it is currently
keeping off the market.
The tensions in the
Middle East have highlighted the ebb and flow of the geopolitical risk premium
in oil prices so far this month. Analysts believe that oil currently includes
between $5 and $10 per barrel in premium to reflect a risk of escalation in the
Israel-Iran conflict.
The past week has
illustrated how traders perceive geopolitical risk. Just as Brent Crude prices
had eased to the upper $80s after the Iranian drone attack against Israel in
the April 13-14 weekend, oil spiked by three per cent early on April 19 amid
reports of an Israeli missile hit in Iran.
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