Fuel pump prices in Nigeria could see a reduction if global crude prices keep tumbling.
This week, global crude prices have seen a reduction as the market reacts to weakening economic data out of China.
It has been said that when global crude oil prices rise, fuel pump prices in Nigeria will rise as well.
In fact, the recent increase in fuel pump prices occurred when global crude prices rose for the first time since May 2023.
However, now that global crude prices are experiencing a downturn, it is possible for fuel pump prices to see a reduction.
But this can only happen if the current trend continues, that is, if the next set of petroleum products imports are purchased when global crude prices are still experiencing a downturn.
A Nairametrics review of global crude oil prices on Tuesday, August 22, revealed that China’s weak economic activity has put a dent in the recent market recovery.
Note that as of Tuesday, August 22, Brent crude was $83.93 per barrel, while WTI crude was $80.40 per barrel at 1:11 PM (GMT+1).
Meanwhile, last week, Brent crude was above $85 per barrel. Experts have said that the fall in global crude prices could be attributed to recent discouraging economic data out of China which have influenced crude oil demand in the country.
After seven consecutive weeks of gains, global crude oil prices fell recently, after China reported weak economic data.
Meanwhile, last week, Reuters reported that the central bank of China said it would work to keep liquidity reasonably ample and keep its policy “precise and forceful” to support the country’s economic recovery, amid rising headwinds.
The central bank of China also said it would “better leverage the dual functions of aggregate and structural monetary policy tools and firmly support the recovery and development of the real economy.”
According to the central bank of China, the country is facing insufficient demand and challenges such as difficult business operations and high risks and hidden dangers in key areas” amid “deglobalization risks” and a weakening global recovery.
The US context
Reuters also reports that amplifying demand concerns is the possibility of another rate hike in the United States, the world’s biggest oil consumer, which central bank officials have not ruled out given persistent inflation.
According to Reuters, the United States is expected to continue to draw down stocks and a preliminary Reuters poll showed crude oil and gasoline inventories were expected to have fallen last week.
Déjà vu
Note also that around this time in 2022, there was a drop in global crude prices after the central bank of China announced a surprise cut in lending rates on the back of weak economic data for July 2022, triggered by the country’s restrictive zero-Covid policy.
At that time, China’s oil refinery output dropped to 12.53 million bpd, which was the lowest level since March 2020 and 8.8% lower than processing rates in July 2021 due to unplanned shutdowns at state-run refineries.
What you should know
Earlier this month, the International Energy Agency (IEA) said that it expects oil demand to expand by 2.2 million barrels per day in 2023, strengthened by summer air travel, increased oil use in power generation and surging Chinese petrochemical activity.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) projected a 2.44 million barrels per day rise in oil demand.
According to the IEA projection, oil demand is forecast to average 102.2 million bpd in 2023, with China accounting for more than 70% of growth.
This is the problem, prices hardly reverse in Nigeria. Let’s hope it works that way, that’s one disadvantage of not having our own refineries.