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Succour for Nigeria as global oil demand, price may decline

By Kingsley Jeremiah, Abuja
27 April 2022   |   2:41 am
Projected demand drop of over 1.4 million barrels per day of crude oil at the international market may provide brief succour for Nigeria’s economy, which has been gasping for breath

FILE PHOTO: Crude oil. REUTERS/Angus Mordant<br />

Demand may cripple by 1.4 million bpd

Projected demand drop of over 1.4 million barrels per day of crude oil at the international market may provide brief succour for Nigeria’s economy, which has been gasping for breath over soaring oil prices.

Although a rise in oil prices was supposed to be a blessing for Africa’s most populous country and leading oil producer, continuous importation of refined petroleum products, especially premium motor spirit and diesel, eroded gains pushing subsidy on PMS to N4 trillion while manufacturers and the aviation sector face soaring prices.

Besides, the development exacerbated by the ongoing war between Russia and Ukraine, Nigeria’s inability to meet crude oil production targets and rising theft and pipeline vandalism turned a supposed blessing into a curse in the face of depleting excess crude account and an unbearable energy crisis.

A global research body, Rystad disclosed that global oil demand would drop by 1.4 million barrels per day, sinking oil demand to 99.6 million bpd on average. This is below 2019 levels of 100.2 million bpd.

Locally, while Finance Minister Zainab Ahmed, had last week stated that Nigeria’s crude oil output would rise in two weeks as shut-in oil wells are to be reopened, at the international level, experts at Rystad are insisting that a rebound in oil demand isn’t expected until next year.

This development could keep oil prices, which are already on the decline and traded early this week at $101 per barrel on a slight decline, helping to douse the existing pressure on foreign exchange needed to sustain petroleum products import bill.

From May, Nigeria’s production quota from the Organisation of Petroleum Exporting Countries (OPEC) is expected to move to 1.753 million barrels per day from the current 1.735 million.

Sadly, Nigeria has struggled to meet the demand. Production had declined by record low of 1.2 million barrels per day recently. Theft and vandalism had been blamed for the development.

Rystad had said the drop in oil demand would be triggered by the Russian invasion of Ukraine, soaring inflation, China’s covid-inspired lockdowns, and supply chain disruptions, adding that more oil demand pressure could be applied through future lockdowns or geopolitical issues.

Oil Price quoted that report as saying “Shrinking demand is a direct result of the impact of lower economic activity globally,”, adding that such a demand decrease could ease today’s tight oil markets, calming oil prices.

Recall that OPEC had earlier cut its 2022 oil demand growth forecast by 480,000 bpd on the back of lower expected global economic growth given the war in Ukraine and China’s covid lockdowns.

The IEA also cut its oil demand forecast by 260,000 bpd to reflect the return of severe covid lockdowns in China. Meanwhile, the World Bank and the IMF have both cut their overall global growth expectations for this year.

Rystad however did not believe that a demand drop could bring oil prices, it instead projected higher oil prices, which could totally destabilize economies like Nigeria’s.

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