An early review of oil prices on Friday, October 6 revealed that Brent crude price was at $84.21 per barrel around 6:17 AM (GMT+1).
Reuters reports that oil prices appeared poised for their most significant weekly drop since March, even as they registered an increase on Friday.
According to Reuters, this surge was accompanied by apprehensions triggered by a sell-off in the United States bond market, which raised alarms about a potential worldwide economic deceleration and the looming spectre of a substantial decrease in fuel demand.
A part of the Reuters report noted:
- “On Friday, Brent futures were up 26 cents, or 0.3%, at $84.33 at 0358 GMT, while U.S. West Texas Intermediate crude futures were up 28 cents, or 0.3%, at $82.59, recovering slightly from a 2% decline on Thursday.
- “Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries,” said Edward Moya, an analyst at OANDA.
- “The worst week for crude since March is starting to attract buyers given the oil market will still remain tight over the short-term,” Moya said.”
Note that on September 28, Brent crude price had reached a peak of $97.24 per barrel, a milestone not seen since November 2022.
This substantial price surge was underpinned by a notable surge in demand, coupled with a discernible reduction in the global crude oil supply.
It is important to underscore the instrumental role played by Saudi Arabia and Russia in driving this surge.
Both nations had previously declared oil production cuts slated to endure until the conclusion of 2023, with monthly evaluations to gauge the prevailing market conditions.
Following the October 4 OPEC+ ministerial panel meeting, no modifications were implemented to the consortium’s oil production strategy.
This decision came in the wake of affirmative statements from Saudi Arabia and Russia, affirming their commitment to maintain voluntary supply reductions as a proactive measure to bolster and stabilize the global oil market.
Both Saudi Arabia and Russia, two influential members of the OPEC+ coalition, underscored their unwavering dedication to the cause of market stability by opting to continue their voluntary supply cuts.
These measures, in tandem with the broader OPEC+ production quotas, have been instrumental in addressing supply-demand dynamics and exerting a degree of control over oil prices.
This steadfast commitment to supporting market equilibrium reflects the collaborative approach of OPEC+ members, who recognize the importance of a balanced and predictable oil market for the benefit of both producers and consumers alike.
The decision not to make changes to the output policy reinforces their collective resolve to navigate the complexities of the global energy landscape with prudence and foresight.
Meanwhile, analysts at Rystad Energy have said that the strategy by OPEC to maintain certain control over oil prices cannot work on a long-term basis while stating that oil demand has peaked.
Reuters reports that oil analysts at Rystad believe that global crude oil prices could drop to about $60 per barrel by 2027 as demand growth slows.
Recall that the International Energy Agency (IEA) had said in September 2023 that fossil fuel demand would peak before 2030 suggesting that fossil fuels are at the beginning of their end.
Meanwhile, OPEC retorted that such narratives were not data-based and would only set the global energy system up to fail spectacularly, leading to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.
The Nigerian context
Back home, the industry is still reeling from the effects of the global crude price increases from last week. During the National Executive Council meeting of the Natural Oil and Gas Suppliers Association of Nigeria this week, the National President, Bennett Korie said Nigerian depots are out of stock of petroleum products due to the increase in landing costs at N720 per litre.
He said that depot owners are grappling with the escalating costs of crude oil and the volatility of exchange rates.
According to him, depot owners are struggling to obtain the necessary bank loans to sustain their operations due to exorbitant interest rates.
The banking sector, in response to the tumultuous economic conditions characterized by instability and soaring foreign exchange rates, has become increasingly reluctant to commit to releasing funds to depot stakeholders.
Consequently, many depots now bear a stark resemblance to ghost towns, with their storage tanks standing empty, and this is not a mere conjecture but a fact that can be readily substantiated.
Among the hardest-hit entities are the filling stations, whose proprietors are facing an uphill battle in securing the funds required to procure products for their retail outlets.
This financial struggle is affecting both independent and major marketers alike, casting a dark shadow over the entire petroleum distribution industry.
We never hear these nation destroyers reduce when prices drop by always shouting even when prices have not gone up. Wicked people