Nigeria’s Brass River, Bonny Light, and Qua Iboe crude oils are trading below $90 per barrel, yet they remain higher than the current Brent benchmark, influenced by China’s economic downturn.
Fears of reduced demand from a slowing Chinese economy and rising expectations of a possible U.S. Federal Reserve interest rate cut as early as September have limited oil market gains.
Brent crude futures fell over 67 basis points to $84.3 per barrel, while U.S. West Texas Intermediate (WTI) dropped more than 70 basis points to $81.3 per barrel.
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China’s economy, the world’s second-largest, grew by 4.7 per cent in April to June, missing the forecasted 5.1 per cent growth and marking its lowest rate since early 2023. The slowdown from the previous quarter’s 5.3 per cent growth is attributed to a prolonged slump in real estate and job market instability.
The US Federal Reserve chair, Jerome Powell, indicated that recent inflation data suggests progress towards the central bank’s targets, hinting at potential interest rate cuts. Lower interest rates could boost oil demand by making borrowing cheaper and stimulating economic activity.
In June, Nigeria’s oil production increased slightly compared to May. Despite marginal gains in production, Nigeria’s economic struggles continue as it relies on borrowing to offset declining foreign cash inflow due to weak oil output.
Crude oil exports, which constitute over 80 per cent of Nigeria’s foreign exchange revenues, have been adversely affected by production declines.
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Although crude oil prices have remained above $80 per barrel, Nigeria has not significantly increased output, citing issues such as underinvestment, vandalism, oil theft, and deteriorating infrastructure in the Niger Delta.
