Oil Prices Plunge to $25 as Saudi Plans to Flood Market

• Oil Prices Plunge to $25 as Saudi Plans to Flood Market

Global oil prices extended decline on Wednesday after Saudi Arabia announced it would sell the whole 13 million barrels per day expected to pump next month despite low oil prices and weak global demand.

The Brent crude oil, against which Nigerian oil is priced, declined from $28.48 per barrel it traded on Tuesday to $25.85 on Wednesday. While the US West Texas Intermediate (WTI) crude oil dipped from $26.61 a barrel it closed on Tuesday to $22.95 on Wednesday.

While rising global uncertainty amid fast-spreading coronavirus is hurting the global demand for crude oil and investment in the energy sector, the OPEC plus agreement coming to an end this month would worsen the already saturated oil market as member states would now pump without the usual production cap following the failure of Russia and the rest of the cartel to reach an agreement on new production cuts. Global investors sold-off around 80 million barrels on Wednesday morning after Saudi Arabia announced its plan to add 13 million barrels per day to the already saturated global market, a move that could push oil price to $20 per barrel.

This, coupled with fast-spreading coronavirus pandemic weighed on the commodity market, especially with nations closing borders and grounding businesses to curb the spread of the novel virus.

In Nigeria, the stock market has lost over N2 trillion in the last eight days and currently below N12 trillion market capitalization. The Central Bank of Nigeria (CBN) has announced measures to contain the damage to the economy and sustain business activities.

The CBN lowered interest rates on intervention facilities from 9 percent to 5 percent to help businesses. The apex bank also instructed banks to adjust loan tenor to accommodate the current economic situation.

However, the inflation rate rose to a 21-month high of 12.2 percent in February, according to the National Bureau of Statistics (NBS). The increase at a period when consumers are struggling with rising foreign exchange and low importation could derail the apex bank plans to stabilize the market.