Oil prices remained steady on Thursday after two days of gains as escalating supply risks in the Middle East counterbalanced ongoing concerns over global demand.
This stability comes after a week of volatility that saw oil prices fall to their lowest levels since early 2024, only to recover slightly in recent sessions.
Brent crude oil, against which the Nigerian is priced, dipped by 4 cents to settle at $78.29 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by 10 cents, or 0.1% to $75.33.
Despite these minor declines, the market maintained most of its recent gains, reflecting the tug-of-war between geopolitical risks and economic uncertainties.
The recent rally in oil prices was partly fueled by a sharper-than-expected drop in U.S. crude inventories.
Data released on Wednesday revealed a 3.7 million barrel decrease in stockpiles, far exceeding analysts’ predictions of a 700,000 barrel draw.
This marked the sixth consecutive week of declining inventories, pushing them to their lowest levels in six months, which helped to stabilize prices.
However, market sentiment remains fragile. Economic data from the U.S. has been weak, with disappointing job growth figures heightening fears of a potential recession.
“Crude oil futures experienced volatility in reaction to a mix of economic concerns and rising geopolitical tensions,” said Mazen Salhab, a market strategist for BDSwiss. “Weak U.S. economic data, including poor job growth, have raised concerns about a possible recession in the U.S.”
Despite these economic worries, geopolitical tensions in the Middle East are providing a floor for oil prices.
The recent killing of senior members of militant groups Hamas and Hezbollah has raised the specter of retaliatory actions by Iran against Israel.
Such actions could disrupt oil supply from the Middle East, which remains the world’s largest producing region, thereby supporting prices.
Adding to the supply concerns, Libya’s National Oil Corporation declared force majeure at its Sharara oilfield earlier this week due to protests.
The company has gradually reduced production at the field, further tightening global supply.
Analysts are divided on the future direction of oil prices. While some foresee potential price rallies driven by tight supply balances, others are cautious, citing economic headwinds.
Analysts at Citi, for example, noted that there is a possibility of Brent crude prices rebounding to the low to mid-$80s.
“Upside risks in the market remain, from still-tight balances through August, heightened geopolitical risks across North Africa and the Middle East, the possibility of weather-related disruptions through hurricane season, and light managed money positioning,” Citi analysts said in a recent note.
As the market navigates these mixed signals, oil prices are likely to continue their delicate balancing act, swayed by the interplay of geopolitical developments and economic indicators.
For now, the supply risks emanating from the Middle East appear to be the dominant force keeping oil prices from falling further, despite the prevailing demand concerns.
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