Despite crude oil production cut by the Organisation of Petroleum Exporting Countries, OPEC, to boost the prices of crude oil, fresh indications have emerged that the combination of supply and demand side factors are muting crude oil price rise to the target of $80 per barrel.
This came as crude oil prices in the international market declined after hitting an all-time high Tuesday, April 2, 2019 to $69.22 per barrel. Available statistics showed that Brent futures were down 15 cents to $69.22 after reaching $69.96, the highest since November 12, 2018, when they last traded above $70, while the U.S. West Texas Intermediate crude fell 15 cents to $62.43, having hit $62.99, the highest since November 7, 2018.
This development might further affect the Nation’s savings in the Excess Crude Account, ECA, as between January and February, 2019, the nation has continued to record negative growth in the ECA, with just $250 million in the account.
Commenting on the development, a Cyprus-based FXTM research analyst, Lukman Otunuga, told Vanguard that, “While global growth worries are stimulating concerns over a fall in demand for crude oil, rising production from US Shale continues to fuel oversupply fears.” Lukman maintained that the ECA has the potential to rebound if Nigeria is able to achieve the 2.3 million barrels per day production volume target for the 2019 budget.
“While the drop has been attributed to last-minute spending for election activities, it does leave the economy vulnerable to downside shocks. If Nigeria is able to diversify away from oil reliance to more sustainable sources of growth, the nation will be less prone to oil shocks.”