The recovery of crude oil prices from last month’s unprecedented crash seems to be moving swiftly, as more countries ease their coronavirus lockdowns and output cuts agreed by OPEC+ and other top oil-producing countries start to whittle down the supply glut.
The oil market recovery continued on Tuesday, with oil prices continuing the upward swing as demand started improving and some economies began to open up.
Bonny Light Spikes: The Nigerian headline crude, Bonny light, sold for $23.24 per barrel on Tuesday, May 5, 2020, compared to the $18.94 per barrel which it sold for the previous day. This represents a whopping 22.7% increase, the highest in about 3 weeks.
Also, in a related development, the Brent crude surged to $31.06 per barrel, while the American WTI crude is selling at $24.69 per barrel. Oil prices have been on an upward swing, just as the market expects improvement based on the hope of output cuts by OPEC+ and oil-producing countries, and a gradual increase in oil demand globally.
According to a monitored report from oilprice.com, oil demand has risen by 2.5 million barrels per day from its low point in mid-April 2020. An American Petroleum (API) report showed that the crude oil inventory was expected to rise to 8.44 million barrels just last week as against the 9.98 million barrels that were expected to be achieved a week before then.
The oil market has been in turmoil following the outbreak of the coronavirus pandemic and the attendant global lockdown as part of measures to contain the disease.
This had led to an unprecedented crash in crude oil prices which seriously affected the Federal Government’s 2020 budget implementation. In response to that, the oil benchmark for the 2020 budget had to be reviewed downwards from $57 per barrel to $30 per barrel.
The Minister for Finance, Budget and Economic Planning, Zainab Ahmed, in a webinar conference on Covid-19 and Government’s fiscal policy decisions on crash in oil prices, suggested that the Government is planning to further reduce the oil benchmark to $20 per barrel to reflect the current price of crude. The production output was also revised from approximately 2.1 million barrels per day to 1.7 million per day.