Crude oil prices struggled for direction on Monday as investors weighed the breakdown in progress between the United States and Iran against the absence of fresh large-scale disruptions to global oil supplies.
Brent crude oil, against which Nigerian oil is priced, initially advanced as much as 1% to $89.40 per barrel before reversing course to trade 24 cents lower at $89.28 by 0620 GMT.
U.S. West Texas Intermediate crude also weakened, falling 67 cents to $81.74 per barrel.
The volatile session followed a strong week for crude, with both major benchmarks gaining more than 5% as renewed tensions in the Middle East restored a geopolitical premium to oil prices.
Investors have become increasingly concerned that efforts to reach an agreement between Washington and Tehran may not produce an immediate resolution to the conflict.
Iranian Foreign Minister Abbas Araqchi indicated over the weekend that Tehran had yet to decide on returning to negotiations with the United States, reducing expectations of an imminent diplomatic breakthrough.
The absence of progress has increased uncertainty around the Strait of Hormuz, one of the world’s most important energy transportation routes.
Shipping activity through the waterway slowed sharply over the weekend following attacks involving tankers.
Ship-tracking data from Kpler showed that only five commodity vessels passed through Hormuz on Saturday, while none were registered on Sunday. That compared with 31 vessels during the previous weekend.
Before the Middle East conflict began, the strait handled approximately one-fifth of global crude oil and liquefied natural gas shipments, making sustained disruption a significant risk to international energy markets.
Recent attacks have added to those concerns.
The United Arab Emirates has accused Iran of attacks involving three vessels operated by Abu Dhabi National Oil Company, while the United States has said it has the capacity to maintain its naval blockade of Iran for an extended period.
Despite the deteriorating geopolitical environment, oil prices have not moved substantially beyond recent highs because traders have yet to see another major reduction in physical crude supply.
That tension is helping explain Monday’s price swings.
The possibility of further attacks on tankers or energy infrastructure is keeping a risk premium embedded in Brent, while the absence of significant new supply losses is limiting traders’ willingness to push prices substantially higher.
Brent has nevertheless recovered strongly from the lows recorded earlier in August as expectations for a lasting resolution between Washington and Tehran have weakened.
The international benchmark settled at $88.52 per barrel on Friday, gaining $1.45 or 1.67%, before briefly approaching $90 during Monday’s trading.
The direction of crude prices will remain closely linked to developments around Hormuz and any renewed diplomatic engagement between the United States and Iran.
Further attacks that materially damage tankers, refineries or other petroleum infrastructure could tighten available supply and push crude higher.
Conversely, a resumption of negotiations or improvement in shipping activity through Hormuz could remove part of the geopolitical premium currently supporting prices.
For Nigeria, sustained Brent prices close to $90 would support the value of crude exports and potentially strengthen petroleum-related foreign exchange inflows, although prolonged disruption to global shipping could increase freight and refined-product costs.
