June 11, 2023

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Crude Oil sells at 59.91dpb as Prices Creep. Will OPEC Act?


Bonny light gained 0.79 on Tuesday to sell at 59.91dpb. This is 1.34% appreciation from 59.12dpb which it previously sold Friday.

The commodity price has crept below 60dpb for the past week as global demand continue to fall. The fall in global demand is not unconnected with the economic slowdown currently being experienced by China which is the driver of global oil demand. On a wider view, there seems to be a global fall in demand and a total global economic slowdown. This is expected to exert further pressure to drive demand further down. Punching on the other side is the full restoration by Saudi Aramco of the damaged production from the Abqaiq and Khurais facilities within just a few weeks of the drone attack, that points to a possibility of oversupply of the product to the market as well. Putting all these in perspective, price may not recover shortly

The concern by energy analysts is what would be the move by OPEC to truncate the pending total slump. For real, top OPEC and other Non-OPEC members know that that there is global economic slowdown and that it is affecting oil demand but they seem to play down the whole situation.  The speculation is that current production cut which is to expire in March may have to be reviewed more downward to be able to keep the price afloat above a damaging level.

Coming back home, how the falling oil price will affect the Nigerian economy is very glaring; serious constrains in the implementation of the 2019 budget and a possible downward review of oil benchmark for 2020 budget. If this is case, what the government will do to sustain capital project funding remain a big challenge. What of the new minimum wage waiting to be implement, a budgetary allocation which is expected to sky rocket recurrent expenditure in the 2020 budget? Bear in mind that economic watchers are already sounding the gong of caution against further borrowing. Is there any other option on the immediate, anyway ? In this light, the Nigerian government need to as matter of urgent demand begin to explore other avenue of fund for our Nation. Meanwhile, we do sincerely hope that marginal gains in price of the crude sustain and that is if OPEC consider seriously abetting move to prevent the looming global economic crisis and act appropriately.

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