For the first time in 2019, the oil price yesterday rose from $62.00 to $64.56 per barrel in the international market, indicating $4.56 in excess of Nigeria’s $60.00 budget benchmark.
Specifically, the prices of Brent, West Texas Intermediate, WTI and OPEC basket stood at $64.56, $53.79 and $62.94 per barrel respectively. Market watchers attributed the development to the positive report of the Organisation of Petroleum Exporting Countries, OPEC which has intensified efforts to eliminate excess supply from the market. A source said: “OPEC output falls by nearly 800,000 bpd in January.
OPEC production declined by 797,000 bpd in January from a month earlier, averaging just 30.81 mb/d. Saudi Arabia, the UAE and Kuwait chipped in most of the reductions. “Still, Russia only lowered output by 90,000 bpd, far short of the 230,000 bpd promised as part of the December deal. Saudi Arabia said it would continue to cut output, with plans to lower production to as low as 9.8 mb/d in March, or roughly half a million barrels per day lower than it had promised. Oil prices jumped on the news.”
In its latest oil market report, OPEC gave impression that the price may leap further because of increased demand when it stated: “Japan’s growth forecast remained at 1.0per cent for 2019 and stands at 0.8per cent in 2018. In the non-OECD countries, China’s growth forecast of 6.1per cent in 2019 remains unchanged from the previous month, following slightly better than expected growth in 2018 of 6.6per cent.
Growth in Brazil remains unchanged at a forecast 1.8per cent for 2019, following 1.1per cent in 2018. Russia’s 2019 GDP growth forecast was revised down slightly to 1.6per cent, the same growth level as seen in 2018. While some positive signals still support global economic growth at around the current forecast level, underlying risks continue, considering ongoing trade tensions, monetary policies and ongoing challenges in several emerging and developing economies.”
“Facilities operated by both indigenous and international oil and gas companies continue to be vandalised by attacks and other illegal activities such as crude oil theft. This led to lower oil and gas production in 2016 particularly for indigenous producers and incidents of environmental contamination. The consequences also included a loss of revenue for the Federal Government of Nigeria and disruptions to gas supply to power electricity for industry, businesses and public-sector services.
President Buhari, however, in his budget speech to the National Assembly, had stated: “Notwithstanding the recent softening in international oil prices, the considered view of most reputable analysts is that the downward trend in oil prices in recent months is not necessarily reflective of the outlook for 2019. “However, as a responsible administration, we will continue to monitor the situation and will respond to any changes in the international oil price outlook for 2019. With regard to oil production, I have directed the NPPC to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day.”