Crude oil prices rose Thursday, January 4, exceeding $68 per barrel, its highest since May 2015, This is fueled by the unrest in Iran which has raised concerns about risks to supplies, while the cold weather fronts in the United States that have also boosted demand, for output cuts led by (OPEC).
The development, which will increase the Nigerian government’s oil revenues to fund the 2018 budget, will, however, hurt the country’s finances via petrol imports and mounting demands by oil marketers for subsidy payments.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu told the media in an interview that the last fuel scarcity started from the high cost of crude oil in the international market. He said that while the country will want inflow from its crude, it would be rather tough for fuel to be delivered at the fixed price of N145.
He informed the Senate Thursday, January 4 that the ad hoc presidential committee on fuel scarcity has been mandated to determine the feasibility of retaining the pump price of petrol at N145 per liter and may explore multiple pricing models.
Reuters reports that the days of anti-government protests in Iran, OPEC’s third-largest producer, have added a geopolitical risk premium to crude prices. The riots have, however, not, affected production exports in Iran.
Brent crude, the international benchmark, rose to $68.27 per barrel January 4 before coming down to $67.90 a barrel. U.S. crude also rose to $61.86 and which showed its highest rise since 2015., while freezing weather in the U.S. has also pushed short-term demand, especially for heating oil.
Right now oil is trading at its highest since December 2014 after OPEC’s decision to stop output cuts so as to prop up crude oil prices. OPEC, supported by Russia and other non-members, hammered out the deal to cut supplies again in 2016, this was aimed at getting rid of the glut build up in the past two years.
The supply cut agreement which was reached last year with high compliance has been, aided by involuntary output declines in Venezuela, as well as unrests in Nieria and Libya.