• Wednesday, May 22, 2024
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2020 off to a good start for Nigeria as oil prices close 2019 near $70/b

Investors brace for further sell-off on Coronavirus, oil

The year 2020 may have started on an optimistic note for Nigeria as oil, which accounts for up to 80 percent of the country’s revenue, closed the year at almost $70 a barrel.

Nigeria’s crude oil, Bonny Light, which is equivalent of Brent crude, topped $67.42 on December 31, 2019. With this, crude oil prices booked their biggest rise in the last three years.

Experts project the current trend will be sustained through the first quarter of 2020.

“Prices ended the year with optimism close to 70$/bbl for Brent and we expect them to stay supported through Q1,” Florian Thaler, OilX chief executive, told Oilprice.

If this happens, Nigeria may be on the way to meeting its revenue target from oil in the 2020 budget, which will in turn aid budget implementation.

The 2020 budget is benchmarked on crude oil price of $57 per barrel, while the average daily crude oil production was fixed at 2.18 million barrels per day (bpd).

But Nigeria may not have the latitude to take full advantage of this development as its daily crude oil production has been restricted to 1.774 million bpd by OPEC+ production cut.

The upward swing in prices has been attributed to the support by the combined force of OPEC+ production cuts and the improvement of trade relations between the United States and China.

“In March, all eyes will remain on OPEC and OPEC+ and whether the action of production adjustment will be extended further. We observe that most of the recent optimism can also be attributed to the US/China trade talks and that will remain a key factor to watch as based on OilX data, China is the single largest growth factor in global oil markets,” Thaler said.

Timipre Sylva, Nigeria’s minister of state for petroleum resources, had unveiled as part of his agenda to increase crude oil production within the lifespan of this administration despite OPEC restrictions.

He listed the priority areas to include implementation of the reduction of Federal Government’s equity stakes in Joint Venture (JV) participation to 40 percent; curbing petroleum products cross-border leakages; completion of the Nigerian Gas Flare Commercialisation Programme; increasing crude oil production to 3 million barrels per day, and reducing the current cost of crude oil production by at least 5 percent.

Other priority areas include aggressive promotion of the passage of the Petroleum Industry Bill (PIB), promotion of inland basin exploration activities, and promotion of deep offshore exploration activities.

“Oil prices have followed the general de-risking drift into year-end despite a rise in Middle East tensions and last week’s bullish-for-oil-price inventory draws as the broader markets appear to be losing some of that holiday cheer,” Reuters quoted Stephen Innes, AxiTrader market strategist, as saying.

Yet not all is rosy.

“Oil prices, though largely expected to trade positive, will face headwinds from subdued global growth momentum and robust U.S. shale output levels in the first quarter,” Benjamin Lu, analyst from brokerage Phillip Futures, told Reuters.