Oil prices experienced a 2% decline on Thursday, fueled by unconfirmed reports of a potential truce between Israel and Hamas. This drop coincided with a notable U.S. refinery shutting down due to a power outage.
Despite a Qatari official denying the existence of a ceasefire, it was reiterated that Hamas had responded positively to a ceasefire proposal earlier in the week.
Brent crude futures decreased $1.85, equivalent to 2.5%, settling at $78.70 per barrel. Concurrently, U.S. West Texas Intermediate crude futures dropped by $2.03, marking a 2.7% decrease to $73.82.
Recent heightened tensions in the Middle East, including persistent attacks by Yemen-based Houthi forces on Red Sea vessels, have led to increased oil prices and disruptions in global oil trading.
Additionally, the Houthi group has affirmed its intention to continue targeting U.S. and British warships, characterizing these actions as acts of self-defence.
OPEC and U.S. Interest Rate
As of November, OPEC+ has enforced voluntary oil production cuts of 2.2 million barrels per day (bpd) to stabilize oil prices. Earlier trading showed an uptick in oil prices following Federal Reserve Chair Jerome Powell’s announcement. Powell stated that interest rates had peaked and were anticipated to decline in the coming months. He also mentioned a downward trend in inflation and predicted sustained economic growth.
Typically, lower interest rates and economic growth lead to an increase in oil demand.
Nigeria Remains Stable Amidst Oil Price Drop
While the oil price decline is notable, it still surpasses the benchmark price of crude oil projected at $77.96 per barrel in the 2024 budget. This indicates that the drop doesn’t threaten Nigeria’s revenue projections from the oil sector.
OPEC had reduced Nigeria’s production quota 2024 below the budget’s target. However, sources speaking to Reuters revealed that the cartel would convene later in March to consider extending these production cuts beyond the first quarter.
