By Adedapo Adesanya
The price of Brent crude rose by 82 cents or 0.99 per cent on Wednesday to $83.74 per barrel after the market calmed on data which showed that crude inventories in the United States fell less than expected and the Federal Reserve raised interest rates by a quarter of a percentage point.
Also, the US West Texas Intermediate (WTI) crude increased by 85 cents or 1.1 per cent during the midweek session to quote at $79.66 per barrel.
The rise in the price of Brent, which Nigeria prices its headline crude against, raises worry for Nigerians as it will likely indicate another increase in the pump price of Premium Motor Spirit (PMS), otherwise known as petrol, after President Bola Tinubu removed the subsidy in May.
Since then, prices have been left to the mercy of market forces, as the federal government planned to save the trillions paid on making fuel cheaper for consumers to boost the struggling economy.
The market had initially fallen when the US central bank raised interest rates by 25 basis points on Wednesday.
The US Federal Reserve Chairman, Mr Jerome Powell, said the economy still needed to slow, indicating that will be further hikes to meet its 2 per cent inflation target.
The hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25 per cent -5.50 per cent range, a level which has not been consistently exceeded since 2001.
Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand.
The Energy Information Administration reported an estimated draw of 600,000 barrels in U.S. oil inventories for the week to July 21.
This compared with a modest inventory decline of 700,000 barrels for the previous week that kept inventories slightly above the five-year seasonal average.
Earlier this week, the American Petroleum Institute (API) reported an estimated build in crude oil inventories.
Oil prices, however, remained relatively strong, stimulated by tighter supply and measures taken by Beijing to strengthen economic growth in China.
After months of traders watching economic indicators and bracing up for a global recession, now the concern is trickling in about the security of sufficient oil supply, analysts note.
This is buoyed by signs of tighter supplies, largely linked to output cuts by Saudi Arabia and Russia, as well as Chinese authorities’ pledges to shore up the world’s second-biggest economy.
However, Reuters reported that although Saudi Arabia will roll over its August output cuts to September, Russia is expected to significantly increase oil loadings in September, bringing to an end to recent export cuts.
Modupe Gbadeyanka