Global oil prices dropped below $90 a barrel on Wednesday as global economic uncertainty continues to weigh on the demand for the commodity.
Brent crude oil, against which Nigerian oil is priced, declined by $4.83 to $88 a barrel, falling below $90 a barrel for the first since Feb. 8, 2022. While, the U.S. West Texas Intermediate crude oil shed $4.94, or 5.7%, to $81.94 per barrel, its lowest since January 2022
Crude oil had traded at a high of $124.76 on the 7th of March, 2022.
This recent fall could be credited to the growing fear of economic recession and another potential interest rate increment by the Federal Reserve which has strengthened the value of the American dollar.
Analysts believe that the slowing demand for the commodity in Europe, the cut in production by the Organisation of the Petroleum Exporting Countries (OPEC), coupled with interest rate hikes by central banks are some of the major factors influencing the fall in oil prices.
It is believed that a stronger dollar will reduce demand for the commodity as it would be expensive for holders of foreign currencies given crude oil is sold in the U.S. Dollar.
After Russian President Vladimir Putin invaded Ukraine, Europe has since aggressively cut reliance on Russian oil and focused on alternatives source of energy like solar, etc.
“The oil market is a bloodbath” as crude prices take a major hit from “sharply weakening” global demand, describes Edward Moya, senior market analyst at Oanda also said.
In China, crude oil imports also dropped by 9.4% in August compared to the same month in 2021.
It is believed that Nigeria will be one of the most affected economies. The country is known to heavily finance its fiscal budget with proceeds from oil. In the 2023 budget, Nigeria had projected total revenue of N8.46 trillion out of which N1.9 trillion is expected from oil-related sources, representing almost 20 percent.
Investors King had reported that Nigeria is confronted with a serious challenge of oil theft losing $3.5 billion in 2021.
The country lost 90,000 barrels per day to theft in August, or roughly 2.8 million barrels in the month, making last month’s production of 1.43 million BPD one of the lowest in five years.