Brent topped $61 per barrel on Wednesday, hitting a fresh high as the pact by oil producers, including the cuts called by the Organisation of Petroleum Exporting Countries (OPEC) and allies, combined with enhanced expectations of US economic stimulus, pushed up prices.
Brent, which is the benchmark for Nigeria’s Bonny light, hit $61.02 while the West Texas Intermediate (WTI) was sold at $58.23.
This development, much as it is good for the Nigerian economy, has turned out to be a double-edged sword given the fact that a large chunk of the revenue to be realised from this would be spent on the importation of refined fuel into the country.
The Nigerian National Petroleum Corporation (NNPC) has for over one year shut the refineries for the purpose of fixing them, but the corporation is yet to make public the cost of rehabilitating them or where the fund to do the work would come from.
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On Tuesday, Timipre Sylva, minister of State for Petroleum Resources, urged Nigerians to prepare their minds for a higher regime of the pump price of petrol given the new fortunes of crude oil in the international market.
With the price of Brent crude hovering around $61 per barrel on Wednesday, Sylva said a higher cost of petrol would be inevitable and urged Nigerians to be ready to bear the pains of the impending new petrol price regime.
There are speculations that crude prices could hit $100 next year on the back of “very easy monetary policy” and reflation trade, Amrita Sen, chief oil analyst at Energy Aspects, told Bloomberg in an interview.
On Monday, Brent crude prices reached $60 a barrel, rising above that threshold for the first time since the start of the COVID-19 pandemic early last year.
In terms of prompt fundamentals, Energy Aspects’ Sen thinks, like some other analysts, that the market has got ahead of itself, “because right now demand is still relatively weak”.
However, the second half of the year does look much, much healthier in terms of demand, the analyst added.
Like other analysts and Torbjörn Törnqvist, chief executive at one of the world’s largest independent oil traders, Gunvor, Sen also sees headwinds to oil price gains above $60 as US production is set to begin rising.
According to Energy Aspects, US oil output will not go back to pre-COVID levels any time soon, if ever, because producers are more focused on shareholder returns right now.
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