Oil price projected to reach $80 as Nigeria suppresses brewing crisis

Goldman Sachs Commodities Research has raised its forecast for crude price, projecting that the price of Brent crude would hit $75 by the second quarter and $80 by the third quarter.

It stated this shortly after the price of Brent crude, against which Nigeria’s crude oil is priced, rose to $68.03 per barrel on Thursday.

Goldman’s prediction also followed the decision of the Organisation of Petroleum Exporting Countries at its meeting on Thursday to leave production quotas unchanged.

The $80 prediction shows an increase from the previous $70 per barrel by the second quarter of 2021.

Goldman said, “OPEC’s supply strategy is working because of its unexpectedness and suddenness.

“We believe it is now clear that OPEC+ is in fact pursuing a tight oil market strategy, with our updated supply-demand balance pointing to OECD (inventories) falling to their lowest level since 2014 by the end of this year.”

At the 14th OPEC and non-OPEC ministerial meeting that held virtually on Thursday, ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130 and 20,000 barrels per day respectively.

Saudi Arabia also agreed to extend its voluntary one million barrels supply cut till April 2021.

“The meeting extends special thanks to Nigeria for achieving full conformity in January 2021 and compensating its entire overproduced volumes,” a statement released at the meeting also stated.

“The ministers thank the Minister of State for Petroleum Resources, Chief Timipre Sylva, for his shuttle diplomacy as Special Envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.”

The ministers agreed to extend the compensation period for countries that exceeded their supply quota till the end of July 2021.

It also cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions and to remain on the course which had been voluntarily decided and which had hitherto reaped rewards.

The next OPEC and non-OPEC ministers’ meeting has been scheduled for April 1, 2021.

Back in Nigeria, the regulators of the oil industry such as the Nigerian National Petroleum Corporation and the Department of Petroleum Resources have continued to measures including persuasion, threats and clampdown to address artificial fuel scarcity in Abuja, Oyo and other states over possible pump price hike.

Just as the NNPC assured the dealers and final buyers that it had enough fuel and had no plans to increase the ex-depot price of petrol, the DPR warned against hoarding and arbitrary hike and went ahead to close down some found to have flouted the instructions.

Operators in the oil sector said the rise in crude oil price meant more revenue for Nigeria but could cause further hike in the fuel prices.

This is because the bulk of the fuel consumed in Nigeria currently is imported.

Petrol queues that surfaced in Abuja and environs last week had spread to other major cities, resulting in over 100 per cent hike in transport fares in some areas.

Oil marketers attributed the scarcity of petrol in the affected areas to the alleged moves by government to hike the price of the commodity.

The NNPC dismissed reports of an upward review in ex-depot prices of petrol. Indeed, it ruled out any increase this month (March).

Major Oil Marketers of Nigeria (MOMAN) also said its members had not increased the pump price of petrol.

But the independent marketers said they could only get the product between N160 and N162 per litre at the depot instead of N148 per litre.

Group General Manager, Group Public Affairs Division of the NNPC, Dr Kennie Obateru, said there was no immediate plan to increase the pump price of fuel, adding that there was enough fuel to last for 40 days nationwide.

The fuel queues are fast disappearing as more filling stations get supply and are opening for business.