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Commuters Groan as Fuel Scarcity Returns to Lagos

Lagosians expressed concern about the region’s impending fuel crisis

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Petrol - Investors King

Commuters in Lagos State have expressed concern about the region’s impending fuel crisis. Not only is it difficult for motorists to obtain fuel, but transportation fares have also risen as a result of the scarcity of fuel.

The scarcity of fuel first appeared in October, when it hit various parts of Nigeria, forcing motorists to spend hours at filling stations battling for the product.

Black marketers charged between N300 and N400 per litre of gasoline in many regions of the nation. 

However, since Monday, commuters have bemoaned the rise in transportation costs in the state, with gasoline costing between N195 and N200 per litre.

As of Wednesday, many gas stations either didn’t sell fuel or did so at exorbitant prices. 

Investors King learned that some drivers were unable to fill up their vehicles from commuters at Agege. One of the commuters claimed that the inability to purchase fuel prevented him from taking his car outside. In a similar vein, the driver stated that he would park his car somewhere and board a commercial vehicle to travel to Lagos Island.

“As it stands, I’m going to park somewhere after I get the passengers out of the car so my friend can help me get fuel. Considering that I might spend up to three hours on the third mainland bridge, I cannot drive this vehicle to the island; it is not worth it. 

According to an online report, queues were reported along the Alausa Secretariat road, as the NNPC (former Oando) was closed to motorists. The same situation was also noticed at Total filling stations in Ojota and Palm Grove on Tuesday. 

The Independent Petroleum Marketers Association of Nigeria blamed it on the depots and the increasing difficulty in accessing petroleum products.

National Controller, Operations, IPMAN, Mike Osatuyi, reportedly said that members of the association could not get sufficient products at the depots.

“No fuel. Even when we were able to get small quantity, DAPPMAN sold it to us at N200/N202 per litre. By the time we transport it to our stations, the cost would be around N210/litre,” he said.

He added that getting petrol to members’ filling stations from the depots now cost as much as N200 per litre in some instances.

If the Federal Government moved forward with implementing the new tax regime, the executive secretary of the Depot and Petroleum Products Marketers Association, Olufemi Adewole, warned that the tax could force businesses to close their doors and exacerbate the scarcity crisis.

Adewole argued that petroleum marketing companies could not sustainably pay such a sum due to the inadequate trading margins of these companies.

Petroleum marketers have a very low operating margin, but their turnover is very high, according to Adewole. Regrettably, the margin does not reflect the turnover.

He revealed that marketers continued to receive the same margins when fuel prices increased to N160 and N200 from the margins they were receiving when a litre was sold for N40.

He stated, “The Finance Act 2020 states that the marketers must pay 0.5% of their gross turnover by the end of this year.

If the new tax regime is implemented, “it is unthinkable that probably half of the petroleum marketing firms existing now may go out of business,” he said, unless the regulator, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, approves a new margin for the marketers.

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Crude Oil

Oil Drops on Monday During Asian Trading Session Amid Chinese Covid-19 Protest

Brent crude oil, the international benchmark for oil Nigerian oil, declined by $2.16, or 2.6% to $81.47 a barrel during the Asian trading session after previously hitting $81.16 per barrel.

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Crude oil - Investors King

Crude oil opened lower on Monday as citizens of the world’s largest importer of the commodity, China protested over tough COVID-19 restrictions.

Brent crude oil, the international benchmark for oil Nigerian oil, declined by $2.16, or 2.6% to $81.47 a barrel during the Asian trading session after previously hitting $81.16 per barrel.

U.S. West Texas Intermediate (WTI) crude oil also dipped by $2.08, or 2.7% to $74.20  per barrel, paring losses from $73.

Last week, Brent crude oil lost 4.6%, its 10-month low while the WTI closed 4.7% lower as global uncertainty continues to dictate commodity prices.

“On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government’s stringent COVID restrictions in Shanghai, prompted selling,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

WTI’s trading range is expected to fall to $70-$75, he said, adding the market could stay volatile depending on the outcome of the OPEC+ meeting and the price cap on Russian oil.

China, the world’s top oil importer, has stuck with President Xi Jinping’s zero-COVID policy even as much of the world has lifted most restrictions.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China’s strict COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.

The wave of civil disobedience is unprecedented in mainland China since Xi assumed power a decade ago, as frustration mounts over his zero-COVID policy nearly three years into the pandemic.

“Bearish sentiment is growing in the oil market with mounting concerns over demand in China and a lack of clear signs from oil producers to further cut output,” said Tetsu Emori, CEO of Emori Fund Management Inc.

“Unless OPEC+ agrees on a further reduction of production quota or the United States moves to reload its strategic petroleum reserves, oil prices may be headed further down,” he said.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, will meet on Dec. 4.

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Lack of Inflows, Revenue Shortage Plunge Nigeria’s Excess Crude Account By 89%

The ECB balance declined from $4.1 billion recorded in November 2014 to $472,513

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Weak foreign revenue inflow amid fluctuations in the global oil market has plunged Nigeria’s Excess Crude Account (ECA) by 89% in the last eight years.

The Excess Crude Account (ECA) is an account used to save excess crude oil revenue by the Nigerian government.

The ECB balance declined from $4.1 billion recorded in November 2014 to $472,513 in the same period of 2022, according to a statement from the Ministry of Finance, Budget, and National Planning.

Economists attributed the substantial decline to the nation’s persistent depreciation in foreign revenue inflows and the struggle with crude oil production amid global uncertainty.

According to Jonathan Aremu, professor of economics at Covenant University in Ogun State, the decline was a result of constant withdrawal without replenishment.

“For you to increase the ECA, the oil price must rise above the budgeted price. If it does not, nothing goes in.  Also, if what you are spending is higher than what goes in, it depletes. This is the situation,” he noted.

On Thursday, crude oil prices declined following the Group of Seven (G7) nations’ proposed plan to cap Russian oil at $65-70 a barrel.

Brent crude oil, against which Nigerian oil is priced, declined to $85 a barrel while the West Texas Intermediate (WTI) crude fell by 0.6% to $77.48 a barrel.

Despite the fact that the benchmark price for oil in the 2022 budget was $57, the price of oil today is still about $30 higher. In spite of higher oil prices, the ECA has been on a decline since early 2022, suggesting that the issue is internal.

“Nigeria’s crude production plunged below 1 million barrels per day (mbpd) for the first time since Buhari became President this year and has averaged about 1.2 mbpd most part of 2022. Therefore, it is impossible to take advantage of the Russian-Ukraine war inflated oil prices like we did during the Gulf war under former president Ibrahim Babangida,” Samed Olukoya, CEO/Founder Investors King Ltd stated.

The government needs to address internal issues, revamp refineries, reduce oil theft and diversify the economy to reduce overexposure to global oil fluctuations.

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Crude Oil Opens at $85 as G7 Nations Move to Cap Russian Oil

The Group of Seven (G7) proposed to cap Russian crude oil at $65-$70 a barrel

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Crude oil

Crude oil opened lower on Thursday, declining to a two-month low following the Group of Seven (G7) proposal to cap Russian crude oil at $65-$70 a barrel.

A greater-than-expected build in U.S. gasoline inventories and widening COVID-19 controls in China added to downward pressure.

Brent crude dipped 50 cents, or 0.6%, to $84.91 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by 46 cents, or 0.6%, to $77.48 a barrel.

Both benchmarks plunged more than 3% on Wednesday on news the planned price cap on Russian oil could be above the current market level.

The G7 is looking at a cap on Russian seaborne oil at $65-$70 a barrel, according to a European official, though European Union governments have not yet agreed on a price.

A higher price cap could make it attractive for Russia to continue to sell its oil, reducing the risk of a supply shortage in global oil markets.

That range would also be higher than markets had expected, reducing the risk of global supply being disrupted, said Vivek Dhar, a commodities analyst at Commonwealth Bank in a report.

“If the EU agree to an oil price cap of $65‑$70/bbl this week, we see downside risks to our oil price forecast of $95/bbl this quarter,” Dhar said.

Oil and gas exports are forecast to account for 42% of Russia’s revenues this year at 11.7 trillion roubles ($196 billion), according to the country’s finance ministry, up from 36% or 9.1 trillion roubles ($152 billion) in 2021.

The G7, including the United States, as well as the whole of the European Union and Australia, are planning to implement the price cap on sea-borne exports of Russian oil on Dec. 5.

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