Despite uncertainties and concerns about the resurgence of the coronavirus pandemic, crude oil prices appear set for a third consecutive week of gains, as the oil market stabilizes on the signs that top oil producers are scaling back crude shipments, as well as a rebound in demand.
Crude oil prices rose higher after the International Energy Agency (IEA), in its May oil market report, had predicted lower global inventories in the second half of 2020, although there are still concerns that a second surge of the coronavirus pandemic could occur soon.
According to information from oilprice.com, Nigeria’s headline crude, Bonny light, approached the $27 mark rising to $26.96 per barrel. This is its highest price in about 2 months. Brent crude has risen to $31.34 per barrel, whereas American headline crude, WTI, which went negative last month, is selling for $27.59 per barrel.
The crude oil prices have gone up in the last two weeks, as most countries begin to relax lockdowns and restrictions that were placed to curb the coronavirus outbreak, in order to allow businesses and factories to reopen.
The International Energy Agency said that the outlook for global markets is improving, with demand getting a little stronger than expected. In its revised forecast for 2020, the IEA is projecting an oil demand decline of 8.6 million barrels of crude per day. This is slightly better than the demand decline of 9.3 million barrels of crude that was earlier projected last month.
As the demand for oil demand improves, the IEA expects crude stockpiles to reduce by about 5.5 million barrels per day in the second half of the year.
With production cuts from OPEC+ and other top producing countries like the United States, Canada, and others, the market appears to be gradually trying to rebalance.
The current situation in the global oil market will help ease the fiscal challenge of the Nigerian government. Just yesterday, the Federal Government approved a further downward revision of the oil benchmark for the 2020 budget from $30 per barrel to $25 per barrel.
The FG also approved a crude oil production estimate of 1.94 million barrels per day.