Economy & Politics
Nigeria’s bonny light crude price falls below Brent crude, WTI
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.
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.
READ ALSO: The stark reason why Crude oil price went negative
Bonny Light vs Brent Prices. Last 3 months.
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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Bonny Light vs WTI Prices. Last 3 months.
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.
READ MORE: Oil firms’ debt status: How it affects Nigerian banks
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.
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IMF lifts 2021 global GDP growth to 6%
The group also warned that economic recoveries are diverging dangerously across and within countries.
The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.
The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.
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What the IMF is saying
“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.
China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
READ: Nigeria needs structural and monetary policy reforms to unlock potential – IMF
On divergent recoveries
The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.
“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.
“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.“
For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.
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In case you missed it
The International Monetary Fund (IMF) identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.
