...Boosts Nigeria’s oil revenues, hurts finances on petrol imports
Crude oil price rose further above $68 per barrel on Thursday, its highest since May 2015, supported by unrest in Iran raising concern about risks to supplies, cold weather in the United States boosting demand and output cuts led by the Organisation of Petroleum Exporting Countries (OPEC).
The development, which will increase federal government’s oil revenues to fund the 2018 budget, will however, hurt the country’s finances on importation of petrol.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu told the media in a recent interview that the recent petrol scarcity in the country originated from the high cost of crude in the international market, saying that while the country wants more revenues from its crude, it is difficult for petrol to be delivered at fixed price at the same time.
Reuters reported that six days of anti-government protests in Iran, OPEC’s third-largest producer, have added a geopolitical risk premium to oil prices.
The unrest has not, however, affected production or exports in Iran.
Brent crude, the international benchmark, went up to $68.27 per barrel on Thursday before coming down to $67.90 a barrel.
US crude oil also rose to $61.86 and also touched the highest since May 2015.
Freezing weather in the United States has spurred short-term demand, especially for heating oil.
Apart from the spike in May 2015, oil is trading at its highest since December 2014 - the month after a historic decision by OPEC to stop cutting output to prop up prices deepened a price collapse.
OPEC, supported by Russia and other non-members, began to hammer out a deal to cut supplies again in 2016, aiming to get rid of a supply glut that had built up in the previous two years and boost prices.
The supply cut pact started a year ago and compliance has been high, aided by involuntary output declines in Venezuela, whose economy is collapsing, plus unrest in Nigeria and Libya.
Producers decided to extend the deal for the whole of 2018.
OPEC’s cuts are helping to reduce inventories around the world and in the United States, crude stocks fell by FIVE million barrels in the latest week, the American Petroleum Institute said on Wednesday ahead of the government’s supply report due later on Thursday.
Balancing the trend towards a tighter market is higher production in the United States, where the OPEC-led effort to push prices up is spurring more shale oil output.
The US government forecasts that 2018 average oil production will hit a record high.
The rising cost of crude in the international market will enhance federal government’s efforts to fund the 2018 budget but would hurt the country’s finances on petrol importation.
The 2018 budget was based on a crude oil benchmark price of $45 per barrel, with an output of Oil production estimate of 2.3 million barrels per day, including condensates, as against that of 2017, which was of $42.50 per barrel, and output was put at 2.2 million barrels per day.
Kachikwu told journalists that it was difficult for the federal government to enjoy more revenue from crude and at the same time sell refined products at a fixed price.
Kachikwu told journalists that it was difficult for the federal government to enjoy more revenue from crude and at the same time sell refined products at a fixed price.
“Like I always say; in this portfolio, you carry two luggages. The first one is that the nation wants more revenue from its crude. So, I work with OPEC to deliver that. But then the nation also wants delivery of refined products at fixed price. So, sometimes, it is difficult,” he added.
With the rising price of crude, the NNPC, which is the sole importer, currently bears the loss of selling petrol at the N145 fixed price.
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