The price of Nigeria’s Bonny Light crude oil rose to $92.79 per barrel over the weekend, marking an increase from the previous price of $90.88 per barrel recorded just last Tuesday. This rise can be attributed to the impact of extended output cuts that have affected the market.
Russia has voluntarily extended its crude oil export cut by 300,000 barrels per day until December 2023, while Saudi Arabia has extended its 1 million daily supply cut into October 2023 in order to boost price stability.
This increase in price, the highest observed in 2023, represents an excess of $17.79 per barrel compared to the 2023 budget benchmark price of $75.
Goldman Sachs Commodities Research predicts that these oil supply cuts could potentially drive oil prices to reach $107 per barrel by 2024.
In an interview with Financial Vanguard, sector analyst Prof. Omowumi Iledare stated that Nigerians and others should prepare for further price increases, particularly as oil inventories have significantly reduced in the United States.
Iledare, who is the Executive Director of the Emmanuel Egbogah Foundation, explained, “Certainly, rising crude price is expected even though it may not reach exactly $100 per barrel in the short run for some reasons. First, it will continue to rise due to growing demand. Second, supply is declining because of geopolitical factors and low inventory levels in the US. Additionally, low reserves replacement puts future supply at risk. Therefore, the price will continue to rise.”
Similarly, in another interview with Financial Vanguard, Prof. Felix Amieyeofori, the lead promoter of EnergyHub Nigeria, emphasized the possibility of oil prices surpassing the $100 per barrel level. He noted that the renewable energy sector is attracting more investment globally than the oil industry, and some economies, including Saudi Arabia, are actively participating in the global push for a cleaner environment. Furthermore, low investment, low production, and export will continue to impact the market in terms of price. Barring any unforeseen circumstances, a significant price increase is likely.
Amieyeofori also pointed out that consumers will have to bear the burden of higher petrol prices, as refiners, who are currently paying more for crude oil, will need to pass on the increased costs.
According to OPEC’s Annual Statistical Bulletin 2023 obtained by Financial Vanguard, Nigeria has been identified as the least refining member, refining an average equivalent of 10,600 barrels per day (bpd) over the past five years. In comparison, Saudi Arabia emerged as the highest refining OPEC member, with an average equivalent of 2.6 million barrels per day (mb/d) during the same period.
Major and independent fuel marketers have largely refrained from fuel importation due to market uncertainties. However, fuel lifting is still ongoing at depots in Lagos, such as Ijegun and Satellite Town, although many filling stations remain closed to motorists and other consumers of fuel.
