Nigeria’s earnings become threatened as Brent, the oil against which Nigeria’s crude is benchmarked, drops below $38bbl. The majority of Nigeria’s foreign exchange earnings come from oil and a crash in global oil prices would lead to a drop in the country’s fiscal revenues putting pressure on the country’s overall budgetary balance.
As of 3:43 pm (local Nigerian Time), Thursday, 29th October 2020, Brent crude oil slumped by 3.7% to its lowest price level since May 2020, as new lockdowns measures came into force across Europe and some parts of the United States of America (USA) to fight the second wave of the coronavirus pandemic. Brent Crude traded at $37.67 per barrel. A day earlier, Wednesday, October 28, 2020, saw Brent crude oil price sit at $39.12 per barrel.
As the lockdown begins to take effect across Europe, particularly Germany and France, demand for oil has weakened resulting in a deterioration of the price of white oil products Prices have been unsettled this week, pressured by the unexpected large oil inventory buildup reported by the American Petroleum Institute (API). The Energy Information Administration (EIA) also reported an inventory increase of 4.3m barrels for the week to October 23
Adding to the bearishness of the market is the ongoing production surge in Libya. Libya currently produces 680,000 bpd and expects production to rise to 1 million bpd in the coming weeks. This is an additional headache for OPEC and its allies, known as OPEC plus, as they had earlier planned to taper production in January 2021 from a recent 7.7m barrels per day to about 5.7m barrels per day.
OPEC plus is scheduled to meet on November 30 and December 1 to set policy which could involve implementing further production cuts and checking compliance of member nations given the weak global oil demand outlook.