What drives crude oil prices?

Mar 29, 2023|Noelle Okwedy

Key questions this article answers:

  1. What factors will determine crude oil prices in 2023?

  2. How will 2023 crude oil prices affect Nigeria?

It’s 7 a.m. on Tuesday, 28th March 2023, and a barrel of brent crude oil costs $78. Three weeks ago, it cost $86 and in November, four months ago, $98. Oil markets are notoriously volatile, and prices move swiftly. Still, many experts remain bullish.

Our 2023 report on the oil market gave a few reasons why we would continue to see higher oil prices in 2023: the Russia-Ukraine war, the G5’s price cap on Russian oil, and China’s lifted coronavirus restrictions. However, we highlighted one factor that could throw a spanner in the works: a global recession.

Well, Q1 is over, and we need to assess where we are now. For the past month, while Nigeria has been consumed with elections (understandably so), the global economy hasn’t stopped spinning, and neither has the ever-volatile oil market, which significantly impacts the Nigerian economy.

Let’s assess the fundamentals in the oil market, current events and how they affect Nigeria.

Fundamentals and non-fundamentals

Commodity markets are driven by market fundamentals (supply and demand) and noise (sentiments, perceptions and chatter).

The first is more straightforward, and you don’t have to be an economist to understand that the higher the supply, the lower the price or, the higher the demand, the higher

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