Brent crude crossed the $95 per barrel threshold as the value of the naira versus the US dollar hit a record low at the black market creating greater doubt about Nigeria’s elimination of petrol subsidies.
At the time this post was being written, U.S. West Texas Intermediate crude futures increased by more than 1% to $92.46 a barrel, while the international oil benchmark Brent crude futures crossed the $95 per barrel barrier.
Impact on Fuel Subsidy and Price
The most recent increase in crude oil prices was expected to drive up the price of gasoline, but the FG’s decision to keep the energy product at N617/litre proved that the subsidy on Premium Motor Spirit had been quietly restored.
In addition to the rapid depreciation of the naira in Nigeria’s most accessible (black) FX market, the price cap on gasoline has made it difficult for marketers.
President Tinubu, the de facto petroleum minister, had previously said that the federal government would take steps to maintain the country’s existing pump price of gasoline without changing its stance on subsidy withdrawal, which raised more questions about the elimination of the subsidy.
Petroleum Marketers had previously claimed that more than 80% of the cost of gasoline is determined by the price of crude oil and the value of the dollar.
Global Oil Market Dynamics
Oil prices have gained for three consecutive weeks and are now around 10-month highs for both benchmarks.
For the fourth session in a row, Crude oil prices increased on Tuesday as low shale production in the United States increased worries about a supply shortage brought on by Saudi Arabia’s and Russia’s continued oil production curbs.
According to the U.S. Energy Information Administration (EIA), the world’s largest economy’s main shale oil-producing regions are on track to produce 9.393 million barrels per day of oil in October, the lowest level since May 2023.
Those estimates come after Saudi Arabia and Russia this month extended a combined 1.3 million barrels per day of supply cuts to the end of the year.
Prices are supported by concerns about tight supply and technical factors. Aramco’s CEO downgraded the company’s long-term demand outlook, now forecasting global demand will reach 110 million barrels per day by 2030, down from a previous estimate of 125 million barrels per day.
Saudi Energy Minister Prince Abdulaziz bin Salman on Monday defended OPEC+ oil market supply cuts, saying international energy markets need light regulation to limit volatility, At the same time, it warned about uncertainty about Chinese demand, European growth, and central banks’ actions to fight inflation.
However, short sellers in the world’s largest commodity market may see some respite as China, the biggest source of oil demand growth in recent decades, accounts for about three-quarters of the increase.
According to China Petroleum & Chemical Corp. China’s gasoline demand will peak this year.
China overtook the United States to become the world’s largest oil importer in 2017. Domestic oil wells currently only meet about 30% of the country’s needs, a level only slightly better than in Europe.
On the other hand, the United States has been a net exporter of oil for three years running.
