What The Rise In Brent Price Means For Nigeria

Brent oil has hit the highest price since late 2014 as a result of  tightened supplies amid strong demands but what does this mean for Nigeria?

Brent crude oil rose for a sixth day on Tuesday to hit its highest since November, 2014 at over $75 a barrel, buoyed by expectations that supplies will tighten just as demand reaches record levels.

Brent’s six-day rising streak is the longest such string of gains since December, with prices up more than 20 percent from 2018-lows plumbed in February.

Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.

This is partly as a result of sanctions against Iran which is pushing prices higher.

The United States has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.

Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply.

OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.

This would have meant good news for Nigeria except the country is still importing oil, in fact as at 2 March 2018 NNPc recorded Nigeria as the highest importerof petrol and  is the only member of the Organization of Petroleum Exporting Countries (OPEC) importing refined petroleum products.

Nigeria lacks the the setup to benefit from this great opportunity which would have boosted the economy.  

Also one of the few factors that has limited oil prices from surging even more is U.S. production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.

As a result of its rising output, U.S. crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.

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