Global crude oil prices rebounded sharply early Wednesday after renewed military tensions in the Middle East and a larger-than-expected decline in US crude inventories reignited concerns over global supply, reversing part of the heavy losses recorded earlier this week.
As at the time of writing 04:30 a.m. (WAT), Brent crude was trading at $87.59 per barrel, up 4.16 per cent, while West Texas Intermediate (WTI) stood at $82.53 per barrel, representing a 4.13 per cent gain.
The latest rally comes barely 24 hours after oil prices retreated following a brief pause in hostilities between the United States and Iran, a development that had raised hopes of a diplomatic breakthrough and eased immediate concerns over crude supplies from the Middle East.
However, market sentiment shifted dramatically after the US Central Command (CENTCOM) disclosed that Iranian forces launched multiple ballistic missiles towards US military bases across the Middle East in what it described as a surprise attack. According to CENTCOM, all incoming missiles were intercepted successfully, with no damage recorded at American facilities.
The situation escalated further after US and Saudi forces reportedly carried out precision strikes on several logistics and weapons facilities in eastern Iraq. Although the operation did not target Iranian territory directly, traders interpreted the renewed military activity as a sign that geopolitical risks across the region remain elevated.
The renewed conflict has restored part of the geopolitical risk premium that had faded after Washington suspended its bombing campaign against Iran last week, with market participants once again pricing in the possibility of further disruptions to crude supply and regional shipping routes.
Supporting the upward momentum was fresh data from the American Petroleum Institute (API), which showed US crude oil inventories declined by approximately 3.3 million barrels last week, signalling stronger demand or tighter supply conditions. The report also indicated that the US Strategic Petroleum Reserve released 3.7 million barrels, pushing emergency stockpiles to their lowest level since March 1983.
Although gasoline inventories increased by about 918,000 barrels and distillate stocks rose by 355,000 barrels, the sizeable crude draw provided additional support for oil prices as investors awaited confirmation from the US Energy Information Administration's official inventory report.
Analysts expect crude prices to remain highly volatile in the coming days as markets react to further developments in the Middle East and official US inventory data. Any confirmation of another significant crude stock draw or additional military escalation could provide further upside support for Brent and WTI prices.
For Nigeria, sustained gains in international crude prices could strengthen government oil revenue and improve foreign exchange earnings. However, prolonged geopolitical tensions also risk increasing the cost of importing refined petroleum products and sustaining elevated domestic fuel prices despite improvements in local refining capacity.