The international oil benchmark, Brent crude, sank on Thursday to its lowest level since May as demand fears and comments from the United States Federal Reserve that it will suspend its bond-buying programme sent prices tumbling.
The further decline in prices also came as the spread of the delta variant of the coronavirus that causes COVID-19 underlined worries about the demand outlook, and as the US dollar rallied.
Crude came under pressure amid weakness in the commodities market and equities more generally, CNBC reported.
Brent, against which Nigeria’s crude oil is priced, fell by 3.8 per cent to $65.67 per barrel earlier on Thursday but rose slightly to $66.13 per barrel as of 7:15pm Nigerian time.
The dollar advanced Thursday after minutes from the Federal Reserve’s July meeting indicated plans to pull back the pace of their monthly bond purchases.
A strong dollar can pressure oil since it makes the commodity more expensive for foreign buyers.
Weak data out of China have also pressured crude in recent sessions after data released Monday showed the economy slowed more than expected in July. Additionally, the country’s refinery output fell to the lowest level in 14 months.
“Concerns about demand due to the global spread of the Delta variant are continuing to preclude any higher prices,” analysts at Commerzbank wrote in a recent note to clients.
Data from the US Energy Information Administration released on Wednesday showed a surprise build in gasoline stocks, which sparked fears of a weaker-than-expected end to the summer driving season.
“Though the summer driving season still has three weeks to go, it is already clear that it will not meet the high expectations,” Commerzbank added.
Oil staged a blistering comeback during the first half of the year as demand returned and producers kept supply in check. But the momentum began to stall in July as the COVID-19 delta variant spread.