The U.S. Energy Information Administration (EIA) has raised its Brent spot average and West Texas Intermediate (WTI) spot average prices for 2021, according to its latest short-term energy outlook (STEO) report.
Spot prices in the international market determine to a great extent what the future price of crude oil per barrel would be
This is, however, good news for Nigeria as it raises hope of earning more revenue, perhaps, after the first quarter of 2021 when it would have been possible for the country to benefit from the additional 500,00 0 barrels per day increase which OPEC+ has allowed, starting from January 2021.
The country’s benchmark for the 2021 annual budget was pegged at $40 per barrel. If the prices average $52 barrels per day, it means that the country stands to gain $11 per a barrel.
Nigeria cannot start enjoying the 500,000 per day increase because it did not comply with the OPEC+ production cut, hence it has to keep its production level at about 1.7 million barrels until the end of March 2021.
Another implication of this development is that oil subsidy would take a large chunk of whatever revenue that may accrue from the spike in prices of the crude oil as the downstream sector of the petroleum industry has not been fully deregulated. The price Premium Motor Spirit (petrol) is still largely controlled.
Read also: Why OPEC is not optimistic about first half of 2021
In its January STEO, the EIA sees 2021 Brent spot prices averaging $52.70 per barrel and 2021 WTI spot prices $49.70 per barrel. The EIA predicted in its December STEO that 2021 Brent spot prices will average $48.53 per barrel and 2021 WTI spot prices $45.78 per barrel.
Oil prices are further expected to increase in 2022, according to the EIA’s January STEO, which projects a Brent spot average of $53.44 next year and a WTI spot average of $49.81.
The EIA estimates that global consumption of petroleum and liquid fuels averaged 92.2 million barrels per day for all of 2020, which it said was down nine million barrels per day from 2019. The organisation expects global liquid fuels consumption will grow by 5.6 million barrels per day in 2021 and by 3.3 million barrels per day in 2022.
The EIA also estimates that global liquid fuels inventories rose at a rate of 6.5 million barrels per day in the first half of 2020 before declining at a rate of 2.4 million barrels per day in the second half of 2020. It forecasts that global inventories will continue to fall, declining at a rate of 0.6 million barrels per day this year and 0.5 million barrels per day next year. U.S. crude oil production is estimated to have fallen from the 2019 record level of 12.2 million barrels per day to 11.3 million barrels per day in 2020. The EIA expects that annual average production will fall to 11.1 million barrels per day this year before rising to 11.5 million barrels per day in 2022.
The EIA, however, notes that its January STEO remains subject to heightened levels of uncertainty because responses to Covid-19 continue to evolve.
“Reduced economic activity and changes to consumer behavior in response to the Covid-19 pandemic caused energy demand and supply to decline in 2020,” the EIA said in its latest STEO.
“The ongoing pandemic and the success of vaccination programs will continue to affect energy use in the future,” the EIA added.
