Oil Eases as US Inflation, Interest Rate Outweigh Iran President Death

May 21, 2024
MT Kali Vessel crude oil

By Adedapo Adesanya

Oil eased on Monday as US Federal Reserve officials signalled more delays to cutting interest rates over signs that inflation was not at the necessary level, with Brent futures declining by 27 cent or 0.3 per cent to settle at $83.71 per barrel and the US West Texas Intermediate (WTI) crude down by 26 cents or 0.3 per cent to $79.80 per barrel.

Two officials in the US central bank said they’re not yet ready to say inflation trends are again moving sustainably back to the target of 2 per cent, weighing in after data last week showed a welcome easing in consumer price pressures in April.

Lower interest rates would reduce borrowing costs for consumers and businesses, boosting economic growth and oil demand.

On the geopolitical front, the market appeared unfazed by political uncertainty in two major oil-producing countries – Iran and Saudi Arabia.

Iran’s president, Mr Ebrahim Raisi, died in a helicopter crash and Saudi Arabia’s crown prince, Mr Mohammed bin Salman, deferred a trip to Japan because of the health of his father, the king.

Iranian oil policy should be unaffected by the president’s sudden death because Supreme Leader, Mr Ayatollah Ali Khamenei, holds ultimate power with the final say on all state matters while the market is already accustomed to Mr Salman’s leadership in the energy sector.

The Organisation of the Petroleum Exporting Countries and its allies, together known as OPEC+, are scheduled to meet on June 1.

Market analysts noted that traders appear numb to developments on the geopolitical front, likely due to the large amount of spare capacity OPEC is sitting on.

Data showed that Saudi Arabia’s crude oil exports rose for a second consecutive month in March, reaching their highest in nine months.

Russia remained China’s top oil supplier in April for a 12th month, with volumes rising 30 per cent from a year earlier as refiners continued to cash in discounted shipments, while supplies from Saudi Arabia fell a quarter on higher prices.

Russian President, Mr Vladimir Putin, said gas output rose by 8 per cent in the first four months of the year but oil output declined by 1.8 per cent, a dip largely due to production cuts under OPEC+ agreements.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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