Nigeria’s Brent Crude Drops To $19.71/b, Lowest In 18yrs
The turmoil in the international oil market worsened significantly yesterday as the Brent crude, the international and Nigeria’s benchmark, dipped significantly by nearly $12 per barrel to ebb at $19.71 per barrel, the lowest price it traded in 18 years.
For Nigeria, the drop in the Brent crude price portended worsening economic outlook for the country as the implications for the nation’s public finance and economic growth projections in the current year remain dire by all assessment parameters.
The Federal Government had initially projected that to rake 90 percent of this year foreign exchange earnings from crude oil sales.
The 2020 budget, passed in December, was calculated assuming crude production of 2.18 million barrels per day at a price of $57 per barrel.
Apparently jolted by the volatility of the international oil market in the first two months of this year, the government last month revised downwards the budget’s benchmarks.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, announced a cut in crude oil benchmark price down to $30 per barrel, while retaining the 2.18m barrels per day crude oil production as earlier projected in the budget estimates.
Updating the public on the fiscal measures adopted by the government to cut budgetary expenditures as the COVID-19 pandemic scourge sustained its devastating impact on globally economies, the minister spoke on both upstream and downstream measures approved by the government to mitigate the impact of pandemic on the economy.
She clarified: “I’m pleased to report that just yesterday His Excellency has approved a number of measures for us to implement.
These measures include the introduction of PMS price modulation mechanism. The reason being that at the low crude oil price of $30 to $32 per barrel, there’s no under-recovery.
The under-recovery is right now zero, in fact, we are at an over-recovery stage, meaning the PMS price will be reduced to reflect the reduced price of the crude oil in the international market”, Ahmed added.
The decline in the Brent crude price fell by nearly $12 per barrel overnight for June deliveries represented a fall of more than 60 percent from January’s peak this year.
However, West Texas Intermediary (WTI) price, the U.S. benchmark for light crude, recovered from its historic slump to less than $1 barrel on Monday to peak at $5 per barrel for May supplies on Tuesday.
The contract for US oil delivery in June also dipped yesterday, dropping to $16 per barrel from around $25 on Monday. As was the case on Monday, the sluggish trend in the oil prices is linked to the growing concerns that producers will soon run out places to store crude oil.
Market watchers believe it could suffer the same fate as May’s contract.
