Oil prices slipped on Thursday as concerns over weak U.S. demand and oversupply weighed on market sentiment despite escalating geopolitical tensions in the Middle East and Europe.
Brent crude oil, against which Nigerian crude oil is priced, fell by 13 cents or 0.2 percent to trade at $67.36 a barrel at 08:29 a.m. in Nigeria, while U.S. West Texas Intermediate (WTI) crude declined by 17 cents or 0.3 percent to $63.50.
The pullback follows gains of more than $1 in both benchmarks on Wednesday after Israel launched an airstrike on Hamas leadership in Qatar and NATO activated air defenses in Poland to counter suspected Russian drones straying into its airspace during attacks on western Ukraine.
Analysts, however, said supply-side pressures and a softer U.S. economy remain the dominant factors influencing crude prices.
According to the U.S. Energy Information Administration (EIA), crude inventories rose by 3.9 million barrels in the week to September 5, against market expectations of a 1 million barrel draw. The surprise build highlights weaker fuel demand in the world’s largest oil consumer.
Tamas Varga, analyst at PVM Oil Associates, noted that while geopolitical developments are lending short-term support, the market remains focused on oversupply concerns.
“Tighter sanctions on Russian crude buyers, notably China and India, could provide further ammunition for oil bulls, but such measures remain at the level of rhetoric for now,” Varga said.
The Organization of the Petroleum Exporting Countries and allies (OPEC+) earlier this week confirmed it will raise production starting in October. Although the increase is smaller than previous adjustments, the decision adds further downside pressure to crude prices.
The EIA also projected that higher OPEC+ output will contribute to significant inventory builds in the coming months, raising the prospect of weaker prices ahead.
Macroeconomic factors are compounding the bearish outlook. Signs of a slowing U.S. economy have fueled expectations that the Federal Reserve will cut interest rates at its next policy meeting.
Traders are awaiting Thursday’s U.S. inflation report, with markets already pricing in deeper rate cuts.
Analysts warned that a stronger-than-expected consumer price index reading could disrupt those expectations and inject volatility into energy markets.
“Traders are taking a more cautious stance ahead of the upcoming U.S. inflation report, with expectations of more significant Federal Reserve rate cuts already factored in, which could be unsettled by a warmer than expected CPI report,” said Tony Sycamore, market analyst at IG.
Brent and WTI have been recovering gradually after hitting three-month lows on September 5. However, with inventories rising, OPEC+ boosting output, and demand concerns persisting, analysts expect downside risks to dominate the market in the near term.