Over the weekend, the price of Nigeria’s Bonny Light crude oil rose to $92.79 per barrel, marking a notable increase from the $90.88 per barrel recorded just last Tuesday.
Thissurge in price can be attributed to the extended output cuts that have had a significant impact on the global oil market.
Russia recently extended its voluntary crude oil export cut by an additional 300,000 barrels per day, continuing this measure until December 2023.
In parallel, Saudi Arabia prolonged its 1 million daily supply cut, which is now set to extend into October 2023. These actions are aimed at bolstering price stability in the oil market.
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The current price of $92.79 per barrel represents a substantial surplus of $17.79 per barrel when compared to the 2023 budget benchmark price of $75.
Goldman Sachs Commodities Research, in its analysis, has predicted that oil supply cuts may drive oil prices to reach $107 a barrel by 2024.
In response to these developments, sector analyst Prof. Omowumi Iledare, who serves as the Executive Director of the Emmanuel Egbogah Foundation, stated that Nigerians and others should anticipate further price increases.
This projection is especially pertinent given the substantial reduction in oil inventories in the United States.
Prof. Iledare commented, “Certainly, rising crude price is expected even though it may not be exactly $100 per barrel in the short run for some reasons. First, it will continue to rise because demand is growing. Second, supply is declining because of geopolitics and inventory becoming low in the US.
“Interestingly too, reserves replacement is low, thus placing future supply at risk. Price, therefore, will continue to inch up.”
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Additionally, Prof. Felix Amieyeofori, the lead promoter of EnergyHub Nigeria, emphasized the likelihood of oil prices surpassing the $100 per barrel threshold.
He pointed to the increasing global investment in renewable energy, which is diverting attention and resources away from oil.
Furthermore, low investment and production in the oil sector, coupled with reduced exports, are factors that are expected to impact prices significantly.
Prof. Amieyeofori also noted that consumers could expect to pay more for petrol, as refiners, who are currently paying higher prices for crude oil, are likely to pass on the cost in the form of higher fuel prices.
It’s worth mentioning that OPEC has identified Nigeria as the least refining member within the organization, with an average equivalent of 10,600 barrels per day (bpd) over the past five years.
This statistic is in stark contrast to Saudi Arabia, which emerged as the highest refining OPEC member, with an average equivalent of 2.6 million barrels per day (mb/d) during the same period.
Saudi Arabia’s refining capacity stood at 2.8 mb/d, 2.6 mb/d, 2.3 mb/d, 2.5 mb/d, and 2.9 mb/d in the years 2018, 2019, 2020, 2021, and 2022, respectively, while Nigeria’s refining capacity remained notably lower.