Brent loses 4.3% as Israel refrains from attacking Iran

The energy market remains unstable as the price of Brent crude oil declined 4.3 per cent on Israel halting attacks on Iran.

This is as the price of diesel an important component for the manufacturing sector rose 64.58 per cent this month to N1,406.05 per litre, According to Financial Derivatives Company (FDC) Limited.

“Brent futures dropped 4.30 per cent to $74.13pb as Israel weighed a U.S. warning against targeting Iran’s oil infrastructure”, said FDC’s managers, Dr. Ifeoma Nwokolo and Terver Kumeka.

The duo said, prices were also pressured by the IEA’s third consecutive downward revision of demand forecasts.

Meanwhile, Nigeria’s oil production declined by 2.22 per cent to 1.32 mbpd in September, the first decline in six months.

Lower oil prices heighten short-term currency and inflation risks. On the expectations of stable global oil supply, we expect oil prices to remain bearish in the near term.

They also said that “in August 2024, diesel prices surged 64.58 per cent to N1,406.05/litre from N852.34/litre (yoy), driven by higher import costs from the naira’s 43 per cent depreciation”, said FDC.

FDC further explained that, the sharp increase has worsened transportation costs, fueling food inflation (37.77 per cent as of September).

“However, barring any shocks to production, the Dangote Refinery’s diesel production may support prices toward N1,050/litre by December”, said FDC. 

Bloomberg said, Brent futures lost 3.69 per cent  ($74.60pb) on easing concerns over Middle East tension, while naira traded flat at N1,698.00/$ in the parallel market.

At the same time, Nigeria’s oil production declined by 2.07 per cent to 1.32mbpd in September, according to the Organization of Petroleum Exporting Countries (OPEC).

Nigeria’s oil export earnings in the second quarter of 2024 stood at 74.98 per cent. 

FDC warns that a decline in oil prices will reduce oil export earnings and deplete external reserves.