Oil trades at $78.09 per barrel, approaching a three-year high

The price of Brent crude rose to a three-year high yesterday, bringing some good news to the Dollar-strapped Nigerian economy amid supply constraints and a drop in crude inventories in the United States, the world’s top oil consumer.

Due to global supply disruptions, energy companies were forced to withdraw large amounts of crude from their inventories.

China’s first public sale of state crude reserves slowed the rally slightly.

Brent futures settled at $78.09 per barrel yesterday evening, while WTI crude in the United States traded at $73.98.

Brent closed at its highest level since October 2018 and WTI at its highest level since July 2021, both for the second day in a row.

Brent gained for the third week in a row, while WTI gained for the fifth, owing to US Gulf Coast output disruptions caused by Hurricane Ida in late August.

According to traders, US oil refiners were looking for alternatives to Gulf crude and were turning to Iraqi and Canadian oil.

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Due to under-investment or maintenance delays during the pandemic, some members of the Organization of Petroleum Exporting Countries and their Allies, or OPEC, have struggled to increase output.

Russia stated that it would continue to be a reliable energy supplier to global markets. However, Gazprom, the Russian gas giant, has been accused of doing too little to increase natural gas supplies to Europe, where prices have risen dramatically.

Iran, which wants to increase its oil exports, said it would resume talks on resuming compliance with the 2015 Iran nuclear deal “very soon,” but did not specify a time frame.

“Extra Iranian barrels of crude seem unlikely to be a 2021 story,” said Edward Moya, senior market analyst at OANDA, noting that negotiations “will be a long drawn-out process.”

Drillers added 10 oil rigs in the United States this week, bringing the total number of oil and gas rigs to a 14-month high.

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According to UBS analysts, Brent could hit $80 by the end of September due to stock draws, lower OPEC production, and stronger Middle East demand.

Due to stock draws, lower OPEC production, and stronger demand in the Middle East, analysts at UBS told Reuters that Brent oil could hit $80 a barrel by the end of September.

“The ongoing drop in oil inventories driven by unplanned supply disruptions may still allow Brent to hit that mark in the coming weeks,” the analysts said.

Surging natural gas prices, according to market analysts, are also attracting the increase, as a gas supply shortage could encourage power utilities to switch from gas to oil if winter turns out to be colder this year.

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The rise in crude oil prices means more revenue for Nigeria, but it also means more trouble for the country’s subsidy payments.

The supply crisis affecting the natural gas market, according to Mele Kyari, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), could push crude oil prices up by $10 a barrel.