Nigeria seems to be falling into a deeper revenue mess as the price of the country’s headline crude, Bonny light fell below the prices of Brent crude and US headline WTI crude.
Bonny Light is a Nigerian crude produced in the Niger Delta and named after the city of Bonny where it is largely sourced from. The oil has low sulfur content by world standards, so it is in high demand for its low corrosive effects on refinery infrastructure and the low environmental impact of its byproducts. The sulfur content ranges between 0.14% and 0.16%.
The Bonny Light price is more often than not correlated with the Price of Brent and typically trades above Brent.
Available information from Oilprice.com disclosed that the Nigerian Bonny light sold for $16.46 per barrel as at 11.56 pm on April 25, 2020, as against the Brent crude which sold for $21.44 per barrel and the WTI crude which sold for $16.94 per barrel within the same period.
It could be recalled that the American WTI, in a historic outcome, sold at a negative price that is below zero dollars per barrel for the first time ever a few days ago. It means that the oil traders were willing to pay to get the crude oil off their hands ahead of the expiry of the contract for delivery in May.
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However, the price of WTI has rebounded since then.
The crude oil prices have been on a downward trend due to the global economic crisis caused by the impact of coronavirus pandemic and global lockdown of businesses and households.
Nigeria appears to be in the worst fiscal crisis it has been in for decades as the country’s revenue was already declining before the sharp drop in crude oil prices globally. The new crude oil prices are way below the revised budget 2020 benchmark of $30 per barrel.
The country had to even sell its crude at a discount of less than $10 per barrel as oil demand keeps falling and the inventory of unsold crude keeps piling up. The newly agreed output cut by OPEC+ and other top oil-producing countries has cut down the country’s crude oil production to 1.4 million barrels per day excluding the condensates.
Even the output cut seems not to have the desired impact on the oil market as some OPEC members are considering further cuts due to the glut in the market.