Queues are gradually resurfacing in petrol stations across Lagos as motorists scrambled to fill up their tanks just hours after President Bola Tinubu’s announcement that the fuel subsidy would be abolished.

Petrol stations, particularly those operated by the Nigerian National Petroleum Corporation (NNPC) in Ikeja and Alausa, witnessed long queues as anxious drivers rushed to secure their share of the dwindling resource.

President Tinubu, in his inaugural address, justified the decision, highlighting the skewed nature of the subsidy system.

“We commend the decision of the outgoing administration in phasing out the petrol subsidy regime which has increasingly favored the rich more than the poor. Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, healthcare, and jobs that will materially improve the lives of millions,” he declared.

The removal of the fuel subsidy aims to redirect the significant financial burden it placed on the government towards essential sectors that benefit all citizens. However, the sudden implementation caught many Lagos residents off guard, resulting in widespread panic and frustration.

Concerns have been raised about the potential impact on the already burdened middle and lower-income groups who heavily rely on affordable transportation.

President Tinubu also acknowledged the need to address multiple taxation complaints, recognizing their negative impact on the economy and the potential deterrence they pose to investors. The review of taxation policies and subsequent measures to create a favorable investment climate are expected to be crucial steps in attracting both domestic and foreign investments, ultimately stimulating economic growth and development.

Oil prices experienced fluctuations on Monday as the market grappled with the potential implications of a tentative U.S. debt ceiling deal and the looming possibility of further interest rate hikes by the Federal Reserve.

Brent crude oil, against which Nigerian oil is priced, appreciated by 0.2% to $77.07 a barrel, while the U.S. West Texas Intermediate crude rose by 0.3% to $72.92 a barrel.

Both benchmark crude prices oscillated between positive and negative territory throughout the day, with trading subdued due to public holidays in the UK and the U.S.

Analysts at brokerage Liquidity Energy LLC noted, “The euphoria of the debt deal is wearing off as concern mounts for another rate hike by the Fed in June.”

Over the weekend, U.S. President Joe Biden and House of Representatives Speaker Kevin McCarthy reached an agreement to suspend the $31.4 trillion debt ceiling and implement a cap on government spending for the next two years. While both leaders expressed confidence in bipartisan support for the deal, analysts remained skeptical about any significant and lasting impact on oil prices.

Currently, market expectations indicate a roughly 50-50 chance of a 25 basis points rate hike by the Federal Reserve at its upcoming June 13-14 meeting, a substantial increase from the 8.3% probability predicted just a month ago, according to CME’s FedWatch Tool. The Federal Reserve, which hinted at a potential pause in its aggressive rate-hiking cycle in June during its last policy meeting on May 2-3, poses a concern for crude oil demand if rates are raised.

“Higher U.S. rates are a headwind for crude oil demand,” warned Tony Sycamore, an analyst at IG based in Sydney. The potential impact of rate hikes on energy demand looms amidst the backdrop of a declining dollar, which weakened further on Monday as the debt ceiling deal boosted risk appetite in global markets, diminishing the greenback’s appeal as a safe-haven currency. A lower-valued dollar typically stimulates oil demand, as the commodity is priced in dollars.

Looking ahead, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, are scheduled to convene on June 4. In a possibly ominous signal to short-sellers betting on falling oil prices, Saudi Energy Minister Abdulaziz bin Salman cautioned them to “watch out,” hinting at the possibility of further production cuts by OPEC+. However, conflicting signals emerged from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicating a leaning toward maintaining current output levels.

The uncertainty surrounding the upcoming OPEC+ meeting has left traders perplexed. Craig Erlam, senior markets analyst at OANDA, remarked, “Traders have been left a little confused as to what we can expect. It may be that Saudi Arabia wants to keep traders on their toes, but to make these comments and not follow through could be perceived as weak and see prices drift lower again.”

Global oil prices declined on Thursday following comments from Russian Deputy Prime Minister Alexander Novak that OPEC and allies, known as OPEC+, won’t be cutting oil production at its next meeting scheduled for next week.

The comment led to a slight decline in oil prices with Brent crude oil, against which Nigerian oil is priced, shedding 41 cents, or 0.5% to $77.95 a barrel at 2:10 pm Nigerian time while the U.S. West Texas Intermediate crude oil dipped by 51 cents, or 0.7% to $73.83 a barrel.

“I don’t think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries…” Izvestia newspaper quoted Novak as saying.

On Wednesday, oil prices were aided by a warning from Saudi Arabia’s energy minister that short-sellers betting oil prices will fall should “watch out” for pain.

Some energy investors took that as a sign that the cartel could consider further production cuts at its meeting scheduled for June 4.

“The obvious reading is that the Kingdom may either unilaterally cut oil production or orchestrate a wider OPEC+ reduction …thereby supporting prices and stinging speculators that are shorting oil,” analysts at bank MUFG said.

A check by Investors King also showed that the ongoing uncertainty surrounding U.S. debt is also weighing on crude oil prices.

Some progress had been made but several issues remained unresolved in U.S. debt ceiling negotiations, House Speaker Kevin McCarthy said on Thursday, as the deadline ticked closer to raise the federal government’s $31.4 trillion borrowing limit or risk default.

Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy reconvened Wednesday at the White House to try to close a deal.

Meanwhile, price declines were limited by an unexpected, massive fall in U.S. crude oil inventories in the week to May 19 reported by the Energy Information Administration on Wednesday.

U.S. crude inventories fell by 12.5 million barrels to 455.2 million barrels as imports declined. Analysts had expected an 800,000-barrel rise.

Gasoline inventories dropped by 2.1 million barrels in the week to 216.3 million barrels, the EIA said, while distillate stockpiles fell by 600,000 barrels to 105.7 million barrels.