Despite the crude oil price crash and the volatility of the oil market, the prices of Nigeria’s flagship crude oil products remained quite stable yesterday.
It was widely reported that the US headline crude, WTI, in a historic turn of event, crashed below $0 yesterday Monday, April 20, 2020, for the first time ever, sending shock waves across the world.
The report from the futures market discloses that they all remained above the $20 mark, with Bonny light selling for $20.88 per barrel, Brass River selling for $22.75 per barrel, and Qua Iboe going for $22.75 per barrel. This is despite the crash into negative territory by WTI and the plunge by Brent crude.
However, this still does not relieve Nigeria of its revenue pressure and foreign exchange earnings, as these prices fall far below the revised budget benchmark of $30 per barrel.
In the preparation of its annual budget, Nigeria usually benchmarks its budget against the Brent crude, which fell to $21.37 per barrel, well below the $30 per barrel revised price.
The country still has a lot of unsold cargoes as demand remains very low. In fact, Nigerian crude was sold at a discounted price of $12 per barrel a few days ago due to decline in interest by buyers to purchase crude cargoes, accumulated inventory and low oil demand due to lockdown and restrictions of businesses and households because of covid-19.
Nigeria’s crude oil export was also cut by 400,000 barrels per day following the deal by OPEC+ and other oil-producing countries in a bid to stabilize the market.
The dangerous exposure of Nigeria to the crude oil price crash and low demand globally will be a huge blow to the country’s ability to meet its revenue target for the revised budget, lead to more pressure and instability in the country’s foreign exchange market, have a negative effect to different upstream projects in the country.