Oil prices continued to rise on Monday, with Brent approaching the $80 mark, building on last week’s sharpest increase since early 2023.
The gains were fueled by concerns over a potential escalation in Middle East tensions and possible disruptions to exports from this key oil-producing region.
Brent crude futures increased by $1.09, or 1.4%, reaching $79.14 per barrel as of 1316 GMT.
Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed $1.15, or 1.55%, to $75.53 per barrel, after earlier rising by more than $2.
Brent crude surged over 8% last week, while WTI jumped 9.1% amid concerns that Israel might target Iranian oil facilities following Iran’s October 1 missile attack. Tensions escalated on Monday as rockets from Iran-backed Hezbollah struck Haifa, Israel’s third-largest city.
Meanwhile, Israel appeared ready to intensify ground operations in southern Lebanon, coinciding with the first anniversary of the Gaza war, which has further fueled conflict across the Middle East. This situation has heightened fears of a broader war potentially involving the United States and Iran, Israel’s ally and adversary, respectively.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, plan to increase production starting in December, following recent cuts aimed at supporting prices amid weak global demand.
While OPEC+ holds sufficient spare capacity to counterbalance any disruptions to Iranian supply, analysts warn that it could face challenges if Iran retaliates by targeting oil infrastructure in neighboring Gulf nations. At the onset of the Middle East conflict a year ago, Brent crude was trading at $88.15 per barrel.
Impact on the Naira
The rise in oil prices to almost $80 could further strengthen the fiscal position since it is above the budget benchmark oil price in the 2024 budget. It could also strengthen the Naira after recent depreciations in the past few months. The naira has hovered around N1540/$ on the official market and weaker on the parallel market.
Last month, Brent crude oil futures dipped below $70 per barrel for the first time since December 2021, signaling a new decline driven by robust supply, demand concerns, and extensive speculative selling.
The global benchmark slid by 2.8%. However, disruptions in U.S. supply caused by Tropical Storm Francine offered some support to prices. Brent futures declined by 48 cents, or 0.67%, while U.S. West Texas Intermediate (WTI) crude dropped 42 cents, or 0.6%, to $68.29 per barrel. Both benchmarks saw gains of about 1% on Monday.
