Oil Price Falls Below Nigeria’s Benchmark

• Oil Price Falls Below Nigeria’s Benchmark

Oil price extended its decline on Tuesday following a seven percent decline last week.

The Brent crude, against which Nigerian crude oil is priced, declined by $2.10 to $59.08 per barrel on Tuesday before rebounding slightly to $59.91.

This was after the US president announced it has frozen all Venezuelan government assets in the US, saying president Nicolas Maduro continuous stay in power and human abuse has forced his hand.

The decision increased global uncertainty as tensions between nations intensified and placed Venezuela’s relationship with the US on the same par with Cuba Syria, Iran and North Korea.

“The escalation in the US-China trade is another negative for the oil demand outlook, as the fallout from the spat continues to greatly impact the Asian economic region, which is key to the oil demand outlook,” John Kilduff, partner at Again Capital Management, was quoted by Reuters as saying.

This is one of the reasons the US Federal Reserve lowered interest rate by 25 basis points last week for the first time in a decade to support domestic growth as external factors –oversea orders, uncertainties, slowing growths etc — are beginning to reflect on the American economy.

However, the Federal Reserve comment that the reduction won’t be as broad as the market is projecting, dampened commodity projection and boosted the US dollar against haven currencies.

The Federal Government pegged Nigerian crude at $60 a barrel in the 2019 budget but with crude trading at $59.91 and likely to fall further once the US and China failed to seal trade agreement as widely expected.

The government with a huge revenue deficit would have to increase borrowing or establish an alternative source of fund to finance the N8.8 trillion budget.