Oil prices recorded impressive gains at the last trading session of the week.
Oil prices settled at their highest levels in more than a year on hopes a U.S. stimulus deal will boost the energy demand coupled with strong compliance in output cuts by OPEC+.
Brent crude futures closed at $62.43 after rising to an intra-daily session high of $62.83, the highest price level since Jan. 22, 2020.
READ: Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure
West Texas Intermediate printed a weekly gain of about 4.7% while Brent crude rallied by 5.3% on the week.
Oil traders are virtually going long on macros that show U.S. President Joe Biden is pushing hard for approval of the $1.9 trillion COVID-19 relief plan to bolster economic growth and help millions of its unemployed citizens.
Oil prices are also printing yearly high attributed partly to production curbs from the Saudis’ and leading oil producers, as they try as much possible in supporting prices weakened by the ravaging COVID-19 virus that keeps disrupting the global economy
READ: Oil prices stay firm after reaching highest point in more than 11 months
What you must know: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil for about two-thirds of the world’s traded crude oil, including Nigeria’s crude (Bonny Light, Brass River, Qua Iboe, etc.).
- About 90% of Nigeria’s export earnings coming from crude oil and about 60% of the Federal government revenue is gotten from oil.
- The importance of crude oil can’t be ignored; it is used mainly in fueling aircraft, vehicles, and trucks that facilitate economic lifestyles and activities in the modern world.
- Derivatives from refined crude are used in the production of polymers, as well as the production of waxes, tars asphalts, and lubricants.
READ: IMF explains why economic diversification is important to Nigeria
However, Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics said that it could weigh on oil prices after pulling back some of its gains at Wednesday and Thursday’s trading session;
“After two downward corrections from Brent’s mid $61’s on two consecutive days, it suggests the markets got positioned a bit peaky especially after the IEA delivered a reality check and revised down its global oil demand forecast for 2021 and warned the market recovery is fragile.
“There might be a growing sense that commentary and analysis got slightly too far over its skis as the price corrects upwards even though the data does not suggest a significant change in the near-term outlook. As such the IEA release provided the market with a vital sensibility check.”
What to expect: Oil traders for the midterm will focus their attention on the March 4 OPEC+ meeting as a risk to the current view at a time energy experts expect Saudi Arabia’s unilateral Feb/Mar cuts to be rolled back.