Oil price hit $67 per barrel for the first time in two and the half years, following news of an explosion at a Libyan crude oil pipeline that feeds the Es Sider sea terminal, home of the largest oil depot in Libya. While the reasons for the explosions are yet to be determined, media reports are suggesting that it was possibly a terrorist attack. The impact of the explosion includes:
Oil prices hit highest since May 2015
As a result of the pipeline explosion, the price of international benchmark Brent crude increased by $1.81, or 2.8 per cent, to $67.06, after hitting an intraday peak of $67.10, its highest level since May 2015.
Supply disruptions are more likely to push up prices
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As a result of a market which is already tightened, any disorder in oil supply will lead to an increase in price. If Libya does not repair its pipeline soon; oil price is likely to go even higher in the coming months. In November this year oil price increased as a result of market backwardation which typically indicates strong demand and tight supplies.
Libya loses up to 100,000 barrels per day
Libya is one of two OPEC members, along with Nigeria, that was exempt from an OPEC and non-OPEC members agreed deal to cap production this year. Both countries have suffered oil supply outages related to internal conflicts. As a result of this explosion, the country loses 70,000 to 100,000 barrels a day of production (bpd). According to OPEC’s latest monthly report, in November Libya produced 973,000 barrels a day.
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Nigerians to pay more for petrol in 2018
The Federal Government had on Monday, clarified that it was not bearing the subsidy on the importation of petrol products, in response to BusinessDay’s question on who is bearing the subsidy of N26 per litre, which the Nigerian National Petroleum Corporation (NNPC) had claimed is for each litre of petrol. As the international price of oil keeps increasing, there is a possibility Nigerians are going to pay more for refined petroleum products in 2018.
Nigeria will have more money to fund its budget.
Improved security and oil infrastructure in the Niger Delta region has also boosted Nigeria’s production in the last 18 months, as Africa’s biggest oil producer looks to meet it proposed oil revenue of N2.442 trillion in the 2018 budget. Early this month, the Nigerian Senate approved an exchange rate of N305/$1, oil production of 2.3 million barrels per day and also increased the benchmark budget oil price to $47 from $45 for the 2018 budget plan. There is a likelihood that the government will meet its estimated revenue for oil as the international price for oil goes higher.
OLADIPO OLADEHINDE
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