By Babajide Komolafe & Nnenna Ezeah
LAGOS — The naira suffered a severe depreciation in the interbank market, yesterday, losing 226k to the dollar following an upsurge in demand for foreign exchange prompted by the removal of limit on banks’ foreign exchange sale to Bureaux de Change,BDCs.

Meanwhile, Brent crude fell more than two dollars toward $106 a barrel with traders and investors anticipating the resumption of oil exports from OPEC-member Libya as a six-month civil war there appeared close to an end.

In the interbank foreign exchange market, the interbank exchange rate rose steeply to close at N155.95 per dollar from N153.695 per dollar on Friday, indicating 226 kobo depreciation for the naira.

The declining fortune of the naira also extended to the official market where the naira lost 49 kobo due to increased demand for foreign exchange. Results of the bi-weekly foreign exchange auction by the apex bank showed that demand rose by 18 per cent to $562 million from $476 million at the last auction.

Though amount offered and sold by the apex bank also increased by 14 per cent to $400 million, it was still inadequate to meet the demand, hence the unsatisfied demand of $162 million. This prompted the official exchange rate to rise to N151.85 per dollar from N151.35.

In the international oil market, Brent crude fell more than two dollars toward $106 a barrel with traders and investors anticipating the resumption of oil exports from OPEC-member Libya as a six-month civil war there appeared close to an end.

Brent crude was down $2.30 to $106.32. U.S. crude was up 35 cents to $82.61 a barrel after dropping to as low as $81.13 earlier. The front-month September U.S. crude contract expires on Monday. “Brent is taking more of a battering but that’s only to be expected,” said Christopher Bellew, a trader at Jefferies Bache. The divergence is just another graphic example of the dislocation between WTI and Brent.”

Libya pumped around 1.6 million barrels per day (bpd), nearly 2 per cent of global supply, before the war cut output. Most of Libya’s high-quality crude flowed to European refiners, but after Libyan exports ceased, tighter supply drove Brent to a two-year high of $127.02 in April. Output has fallen to almost nothing during the conflict. The question now is how soon Libyan output will be restored. Carsten Fritsch, an analyst at Commerzbank in Frankfurt, said it could be about six months before output climbs back to 1 million bpd or so, having looked at what happened in Iraq in 2003.

“Output was close to zero in the months after the U.S. invasion,” he said. “The big question is how much damage has been done to the oil facilities in Libya where the fighting has gone on much longer than in Iraq. There’s a risk it may take a bit longer in Libya.” The premium that has been in the Brent oil price since civil war broke out in Libya should now start to shrink, but Fritsch said this is unlikely to happen overnight.

“Given that the Brent price was below $100 before the uprising started in March, prices have some way to go, but it won’t come down as quickly.”

Olivier Jakob, oil analyst at Petromatrix, agreed saying he did not expect a flood of Libyan crude oil on a very prompt basis as when it restarts some of the oil production will probably go to local refineries. Tight supplies of Libya’s light sweet crude in Europe helped fuel a widening of the spread between Brent and U.S. crude.

The spread is already narrowing from a record $26.69 reached last week, and could contract further with the prospect of resumption in Libyan supply. “The weekend event in Tripoli is obviously more negative for crude oil in Europe (or the U.S. Gulf) than in Cushing and the immediate overnight response has been not surprisingly a narrowing of the Brent premium to WTI,” said Jakob.