The price of crude oil has posted a 7-month low, declining by 4% to $57 a barrel in two days. This is the first time oil price would post a huge fall since January 2019.

According to oilprice.com, Brent oil price hit the lowest level since January and down by over 25% from the highest peak of the year reached in April. Also, Western Texas Intermediate (WTI), dropped almost 6% to $50.52 a barrel, a level which was last seen in mid-January.

The details: An earlier report published by Nairametrics revealed that oil price dropped to below $60 a barrel in the early hours of Tuesday, as trade tension between the U.S and China intensified.

• Meanwhile, financial times also revealed that the latest drop is traceable to the escalating trade war tensions between the US and China as oil demand outlook has been badly hit while inventory is building.
• It has, however, been revealed that other factors pushing the oil price down include reports that China is purchasing oil from Iran despite US sanctions, making the market to lose the earlier tightness.

[READ: Critical times loom for Nigeria as oil price dips below $60 budget benchmark]

Oil price forecast: As oil prices continue free fall in recent weeks, the Energy Information Administration (EIA) has cut its Brent spot price forecast. According to the EIA, Brent spot price forecast has been cut to $64 per barrel in the second half of 2019 and $65 per barrel in 2020 in its August short-term energy outlook (STEO).

• Earlier this week, Fitch Solutions Macro Research (FSMR) analysts made a “major downward revision” to their Brent oil price forecasts.
• Meanwhile, fresh concerns are emerging that oil price may continue its free fall as the escalating trade war between U.S and China deepens.
• Analysts are predicting that the deepening tensions between the US and China, following the decision on Monday by Beijing to allow the renminbi to fall below 7 to the dollar after the US slapped a new set of tariffs on the Asian country, are dampening investors’ sentiment and oil prices.

Can OPEC come to rescue? Crude oil faces a renewed threat of a bear market, and this may become a growing concern for the Organisation of the Petroleum Exporting Countries (OPEC) as it had pledged to regulate the crude oil market throughout 2019.

• Fresh updates from the US Energy Information Administration show that crude inventories are unexpectedly increasing for the first time in eight weeks.
• While OPEC in its last monthly meeting expected demand to rise, it remains uncertain if the group’s crude oil supply cut will tame oil price from further fall until its next meeting on December 5

The Nigerian Economy: In all of these, the Nigerian economy stands the risk of being financially trapped following a continued fall in oil price.

• Oil still remains Nigeria’s main source of revenue and free-fall as currently being witnessed is bad for the economy.
• $60 a barrel falls below Nigeria’s 2019 budget, and largely means a threat to Nigeria’s budget implementation.
• In a report published on Wednesday, Nairametrics revealed that Nigeria’s external reserves had continued to drop in recent weeks and this may largely be traceable to episodes in the global oil market.

[READ FURTHER: Nigeria’s external reserves slip below $45 billion in just two months]