Oil prices dropped on Tuesday as prospects of OPEC+ (OPEC and other associated non-OPEC countries) cutting global oil outputs in 2020 is overshadowed by slowing global demand for the commodity.
Nigeria relies on crude oil for about 85% of government revenue as well as driving its meager GDP growth rate. Brent futures were down 11 cents to $64.14 per barrel and West Texas Intermediate oil futures were 10 cents to $58.92 a barrel. Nigeria’s oil price is benchmarked against Brent Crude.
In a report filed by Reuters, some analysts claimed the trade rift between China and the United States could negatively impact oil prices if it lingers on.
“The euphoria (on output cuts) was short-lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict,” said ANZ Bank on Tuesday.
According to another analyst, rising production output from non-OPEC countries could erode whatever gains OPEC+ plans to benefit by increasing its output cut from 1.2 million barrels per day to 1.7.
“Despite the voluntary restraint from OPEC, world oil markets remain well supplied … with non-OPEC output expected to rise by well over 2 million BPD next year, with big increases in the U.S., Brazil, and Norway,” said Henning Gloystein, director of global energy and natural resources at Eurasia Group in a note.
[READ MORE: Why OPEC may not change output cut soon)
However, according to data released on Sunday, exports from China in November fell 1.1% year on year. This was attributed to fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast: Washington’s next round of tariffs against some 156 billion dollars Chinese goods are scheduled to take effect on Dec. 15.
U.S. President Donald Trump reportedly feels reluctant to implement the next round of tariffs, according to U.S. Agriculture Secretary Sonny Perdue, but he wants “movement” from China to avoid them.
OPEC and its allies, on the other hand, had begun capping its supply since 2017, due to continuous increase in U.S. crude production, which soared from about 8.8 million BPD to a record 13 million BPD recently and is expected to rise further in 2020.
Nigeria’s 2020 budget has a benchmark oil price of $57 and an output target of 2.18 million barrels per day. At $64, Nigeria still has a buffer if $7.
