Opec cuts sanctions against Venezuela and Iran plus a end to Sino-US trade spat rally oil prices to over $65 a barrel

NIGERIA'S 2019 budgetary projections appear to be on track again after global crude oil prices rose again as the production cuts initiated by the Organisation of the Petroleum Exporting Countries (Opec) have pushed them up to $65 a barrel.

 

In January President Muhammadu Buhari presented his 2019 budget to the National Assembly with government projections based on 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.

 

This year, Nigeria's budget projections are predicated on crude selling for $60 a barrel and the nation producing 2.3m tonnes a day. In January, things were looking dire as not only had prices dropped to about $50 a barrel but Nigerian output was also below 2m barrels per day (bpd), leaving a huge budget deficit which the government had no means of filling.

 

Things are now looking brighter, however, as this morning, oil prices rose due to a combination of Opec cuts and the news that the US and China are close to reaching a trade deal after a year-long tariff row. Brent Crude, which is identical to Nigeria's Bonny Light Crude, saw its prices rise to $65.25 dollars a barrel this morning.

 

Prices were partially buoyed by the fact that the US and China appeared close to a deal that would roll back US tariffs on at least $200bn worth of Chinese goods. Beijing has also pledged structural economic changes and the elimination of retaliatory tariffs on US goods, adding support to a market that has been rallying for the past two months amid production cuts.

 

Opec supply fell to a four-year low in February as Saudi Arabia and its allies over-delivered on the group’s supply pact, while Venezuelan output registered a further involuntary decline. One Barclays Bank analyst said: "Opec exports are off by over 1.5m barrels per day since November."

 

Energy analysts at Fitch Solutions added that they expected Brent crude prices to average $73 per barrel in 2019. Oil prices have been further pushed up by US sanctions against Opec members Iran and Venezuela, which Barclays Bank estimates to have resulted in a reduction of around 2m bpd in global crude supply.

 

Also, in the US, there are signs that the oil production boom of recent years, which has seen crude output rise by more than 2m bpd since early 2018 to more than 12m bpd, may slow down. US energy firms have cut the number of oil rigs looking for new reserves to the lowest in almost nine months as some producers follow through on plans to cut spending despite an over 20% increase in crude futures prices so far this year.

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