As expected the price of Brent Crude has dropped by a massive 5% in Asian Market following the gridlock reached by representatives of oil-producing countries. Brent Crude Prices wad down by more than 5% to about $40.87 per barrel in Asian markets which typically opens before other markets.
Leading oil producers met over the weekend in Qatar in an attempt to reach an agreement on oil output freeze. However, the meeting failed to deliver as Saudi Arabia refused any output cap that did not include Iran also agreeing to some cuts. Iran on the other hand will not cut production because it had just re-entered the oil markets after years of sanctions and is desperately looking to claw back market share.
According to a recent report from OPEC, Supply disruptions in Nigeria and Iraq, and signs that US shale oil output is shrinking, also lifted oil prices. The oil cartel also reported that, US refiners were providing support, with utilization above 89%, as plants returned from maintenance ready to meet buoyant gasoline demand. Massive bullish bets (close to record levels) on higher futures prices by speculators also helped in elevating oil futures prices to near $40/b in March. This occurred despite a slight improvement in fundamentals, as oversupply still persists amid record-high global crude oil inventories.
The rise in the price of the Brent Crude was a small light in the gloom of darkness that has befallen the Nigerian economy in months and was cautiously celebrated when it crossed the Budget Benchmark of about $38. Nigeria was recently overtaken by Angola as Africa’s top oil producer due to Force Majure declarations made on some if its major export terminals . Nigeria’s crude oil production has been hampered by several pipeline vandalization experienced in oil-producing areas such as the Forcados terminals.
