Crude oil prices continued on its upward spike on Tuesday, fluctuating at 2016 highs of $46 per barrels, but this may be bad news for Nigeria.
Brent crude prices climbed on Tuesday to trade at $45.08 per barrel as at 12:45pm Nigerian time, while the West Texas Intermediate (WTI) sold for $43.17.
This is the highest in 2016, after the previous week’s rise to $46 in early trade in London and some part of Europe.
For the Organisation of Petroleum Exporting Countries (OPEC), there has also been a corresponding rise in its basket price, peaking at $40.09 on Friday, April 22.
IMPLICATIONS FOR NIGERIA
Predicting oil futures have become increasingly difficult, following the rapid reaction of the market to OPEC and non-OPEC decisions or stalemates.
However, the current rise in crude prices is seen as a reduction in global glut, which has been responsible for the oil slump in recent times.
With Iran’s return to the global crude oil market in January 2016, crude oil prices dipped on increased oversupply, to hit $27.10 per barrel, lowest in 11 years.
However, the current rise in crude oil prices is as a result of June 2016 trading futures, which is also planned to be Nigeria’s lowest export in 2016.
According to the April OPEC monthly oil market report, vandalism of oil pipelines in Nigeria has seen Nigeria’s production levels fall below Angola’s.
According to Reuters, Angola plans to export 1.7 million barrels per day in June, while Nigeria is planning 1.57 million.
Nigeria’s oil production expectations as seen in the 2016 budget is 2.2 million barrels per day, but the country is over 600,000 barrels short of that, hence rising crude oil prices may have marginal or negative effects on the country.
At $38 per barrel and production capacity of 2.2 million, Nigeria expects to make $83.6 million per day.
But at $45 per barrel and production capacity of 1.6 million, Nigeria expects to make $72 million per day, showing that increased crude oil prices may not have positive impact on the economy.