Crude oil prices fall below $70 for the first time since 2021

The price of Brent crude oil has fallen below $70 per barrel for the first time since December 2021, raising concerns about slowing global growth.

The significant drop in oil prices is set to further strain the naira, which has depreciated to N1,600/$ in recent weeks.

Meanwhile, global stock markets showed mixed results as investors monitored interest rate decisions in the US and Europe.

Oil analyst Tamas Varga at PVM Oil Associates said the OPEC oil cartel revising its demand estimates lower was one reason for the fall, but not the main one as the changes were minimal.

“Chinese economic woes — August crude oil imports fell 7 percent on the year — and the growing belief that the Fed will only cut 0.25 percent next week weigh more heavily in the current sell-off,” he told AFP.

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Swiss quote analyst Ipek Ozkardeskaya said even mitigating factors like impending interest rate cuts and OPEC+ holding off on production increases was not enough to stem the downward trend.

“Oil bulls are not willing to swim against such a strong tide — and that also adds to the momentum,” she said.

US equities slumped Friday after disappointing US jobs data rekindled fears the Federal Reserve had waited too long to begin cutting interest rates and the economy could fall into recession.

While they rebounded on Monday, the recovery lost steam on Tuesday with the Dow lower in late morning trading while the S&P 500 and Nasdaq Composite held onto gains.

Traders were also keeping an eye on US politics.

The sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump is a potentially game-changing moment for the 2024 US presidential election.

“Tomorrow’s US inflation figures could be the next key test of investor sentiment,” noted AJ Bell investment director Russ Mould.

The Federal Reserve is widely expected to cut US interest rates at next week’s meeting but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.

But Tuesday’s plunge in oil prices may indicate that those fears are outweighed by concern that policymakers are behind the curve.

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“Financial markets have shifted their focus from bringing down inflation to shoring up economic growth,” said Saira Malik, chief investment officer at asset manager Nuveen.

“Market volatility has climbed amid downside surprises in macroeconomic data — especially labour market indicators.”

Fresh worries about China’s economy are also dampening sentiment, with mixed trade data doing little to soothe investor concerns.

Data showed exports jumped in August but imports fell well short of expectations as the country’s leaders struggle to boost consumption.