By Udeme Akpan
LAGOS— Crude oil price has dropped by 10 per cent in the international market as a result of excess supply and speculation, thus constituting a new threat to the generation of adequate funds for the implementation of Nigeria’s N7.28 trillion 2017 budget.
Crude oil price, which stood at over $50 a fortnight ago, crashed to $45 per barrel, yesterday, following increased lull in the market.
A survey of the London market, yesterday, showed that the price of Organisation of Petroleum Exporting Countries, OPEC, basket of 13 crudes, including Nigeria’s Bonny Light, stood at $45.78 a barrel.
The prices of other crude oil grades such as WTI and Brent stood at $45.83 and $48.15 respectively.
OPEC indicated in a statement that, “the price of OPEC basket of 13 crudes stood at $45.78 a barrel on Thursday, compared with $46.78 the previous day, according to OPEC Secretariat calculations.
“The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).”
The lull in the market was attributed to speculation over the beginning of commercial production at forcados.
The technical director of template Designs Limited, Mr. Bala Zaka said in a telephone interview that the drop in price was also attributed to speculation over the return of forcados, which has the capacity to produce over 200,000 bpd.
He said: “OPEC had recently excluded Nigeria and Libya from its crude oil output cut because of the inability of the nations to produce and export adequate oil. But with the commencement of production at forcados, the nation is believed to be exporting commercial oil to the market unlike in the past.”
Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu, had indicated in a telephone interview that the market situation was also fuelled by the decision of the United States not to be part of the Paris Club on climate change.
He had said this gives impression that the United States would flood the market with commercial shale oil, thus worsening the present state of the market.
In practice, Chukwu had stated that the United States would not be able to do much damage to the market, as there was a limit to which shale producers can go in terms of increasing supply.
The Chairman of International Energy Services Limited, Dr. Diran Fawibe, a close watcher of the volatile market, had said in a telephone interview that the development constituted fresh threat to foreign exchange generation and budget implementation.
However, OPEC had predicted in its May, 2017 oil market report that, “the forecast for global economic growth remains at 3.3% in 2017, compared to growth in 2016 of 3.0%. The recent growth dynamic in the global economy has been confirmed with the exception of the US, which is still expected to rebound in the remainder of the year.”
“While US growth remains at 2.2%, Euro-zone growth in 2017 was revised to 1.7% from 1.6%. Japan’s 2017 growth forecast remains at 1.2%. China’s 2017 growth was also revised higher to 6.5% from 6.3%, while India’s forecast remains at 7.0%. Russia’s and Brazil’s 2017 growth forecasts remain unchanged at 1.2% and 0.5%, respectively.”
“World Oil Demand World oil demand in 2016 was revised higher by 65 tb/d to reflect the most recent data. For 2017, oil demand growth is anticipated to be around 1.27 mb/d unchanged from the previous report with total oil demand expected at 96.38 mb/d. Non-OECD will continue to lead growth at 1.04 mb/d, while OECD continues to grow albeit at a reduced pace of 0.23 mb/d. World Oil Supply Non-OPEC oil supply in 2016 was revised marginally lower due to a downward adjustment in Russian oil supply in 4Q16 to now show a contraction of 0.71 mb/d to average 57.3 mb/d,” it had added.