December 6, 2022

Oil market: Uncertainty as EU embargo on Russian crude begins

Withdraw trade privilege to Pak for terror

European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman

By Udeme Akpan, Energy Editor

THE price of Nigeria’s Bonny Light, yesterday, rose to $86 per barrel, from $85.49, indicating that the global market has started to respond as the European Union, EU ban on Russian crude commenced.

The EU ban on all seaborne imports of Russian oil and a price cap of $60 per barrel on its oil offered for sale in other parts of the world are part of measures targeted at tackling Russia over continued attack on Ukraine.

Checks by Energy Vanguard indicated that the prices of other crudes, including the United Kingdom, Brent also rose to $88.31 per barrel, from $86 per barrel recorded over the weekend.

In an interview with Energy Vanguard, Lead Promoter, EnergyHub Nigeria, Dr. Felix Amieyeofori, who provided details of the ban, said: “The EU is pegging Russian Oil at $60/bbl only through tanker vessels, while the export through the pipeline will sell at global market price.   The ban is only if they are coming through the sea and want to sell at market price. However, Russia is working to see how to go around this with their own tankers and insurance companies, though major economies, like China, do not have confidence in Russian insurance companies. 

“There are two routes Russia will take – surprise the EU and the World and agree to sell at the $60/bbl or below until they are able to sort out this ban, which may take some time.  The Global market will suffer a deficit in supply, and an increase in crude price, until Russia finds an alternative route for its crude supply.”

Similarly, the Executive Director, of Emmanuel Egbogah Foundation, Professor Iledare, who endorsed the ban, said: “It is better to suffer and die for doing the right than live in luxury doing the wrong thing. That is motivating the EU, I think. Buying Russian oil for survival while the money paid to Russia is funding its unjust war is burdensome.”

Nigeria’s output, budget 2023

The Nigerian Upstream Petroleum Regulatory Commission, NUPRC, disclosed that the nation’s daily crude oil production, including condensate, averaged 1.230 million bpd in October 2022, indicating a marginal drop of 93,000 bpd when compared to 1.137 million bpd recorded in September 2022.

The fall in output was attributed to pipeline vandalism, oil theft and illegal refining in the Niger Delta, currently estimated at between 300,000 – 400,000 bpd.

The reports also indicated that Nigeria recorded an excess of $30.7 per barrel of oil sold when juxtaposed against the $70 per barrel benchmark price of the 2023 budget, which was also based on 1.69 barrels per day.

But the gains associated with high prices would be greatly eroded because of limited output, due to oil theft and other vices.