Opec cuts and fallout from Venezuelan crisis keep crude oil prices at $62 a barrel to Nigeria's benefit

NIGERIA'S 2019 budgetary projections have got a slight boost as global crude oil prices have remained firm at $62 barrel thanks to a combination of factors including the political turmoil in Venezuela and Organisation of Petroleum exporting Countries (Opec) cuts.

Last month, President Muhammadu Buhari presented his 2019 budget to the National Assembly with government projections based ion crude selling for $60 a barrel. At the time, global oil prices had dropped to around $50 a barrel but over recent weeks they have risen again thanks to production cuts by Opec member states and Russia.

With prices hovering over $60 a barrel, Nigeria's budgetary projections just have the problem of output as the budget was based on production levels of 2.3m a barrels a day. At the moment, Nigeria's output is less than 2m barrels a day but there is hope that increased sanctions against Venezuela might rally prices further.

Earlier today, Brent crude oil futures prices rose to $62.76 per barrel, 1¢ above their last closing figures on Friday and their highest since November 21. Nigeria's light Bonny crude like Brent is low in sulphur content and the two varieties generally sell for the same price on international markets.

With the US set to impose further economic sanctions against Venezuela as the two countries are involved in a bitter diplomatic spat, analysts predict that prices may rise even further amid supply fears. Vivek Dhar, commodities analyst at the Commonwealth Bank of Australia, said: “While Venezuela’s output reportedly rose last month, fresh US sanctions on the country could see 0.5 to 1% of global supply curtailed.”

Opec oil supply fell in January by the largest amount in two years despite sluggish production declines from Russia as the country missed the target for the output cuts. Russian production fell last month to 11.38m barrels per day but that was only down by 35,000 barrels from its October 2018 level that is the baseline for the output reduction pact.

Russian energy minister Alexander Novak has said the country’s overall cuts from the October baseline would total 50,000 barrels per day in January. as part of the agreement to reduce output in a bid to rally global prices, Russia has pledged to reduce oil production by 230,000 barrels per day from October.

US energy firms cut the number of oil rigs operating to their lowest in eight months, to 847, last week as some drillers followed through on plans to spend less on new wells this year. Also, the trade tensions between the US and China have also impacted the market and helped keep prices firm.

President Donald Trump has said he would meet with Chinese President Xi Jinping, perhaps twice in the coming weeks to try to seal a comprehensive trade deal with Beijing. Analyst Fitch Solutions said that overall, the oil markets had a fundamentally bullish outlook due mainly to the supply cuts led by Opec as well as increasing demand despite the slowdown in economic growth.