Nigeria’s light sweet crude falls to $50.10 a barrel

Crude oil prices struggled to stay around $50 yesterday, amid persistent concerns over global oil glut as against the $53.79 it recorded the previous day.
Specifically, Nigeria’s light, sweet crude futures for delivery in August traded at $50.10 a barrel, down four cents, or 0.1 per cent, on the New York Mercantile Exchange.
This is far below the approved $53 per barrel benchmark for crude oil in Nigeria’s 2015 budget. It lost 1.5 per cent in the previous session, falling to a near four-month low of $50.15 a barrel.
Brent, the global benchmark, fell 45 cents, or 0.8 per cent, to $56.65 a barrel on ICE Futures Europe. WTI futures were off around 1.5 per cent to trade near $50.50 a barrel. Last week, Iran struck a nuclear deal with several world powers that, among other things, will end an oil embargo and allow the country to increase production for export.
Meanwhile, the International Monetary Fund (IMF) has said that the declining crude oil prices will have severe impact on Nigeria’s economy. In its latest 2015 World Economic Outlook titled: “Uneven Growth: Short- and Long-Term Factors,” released recently, the IMF acknowledged that Nigeria and some of the region’s oil-exporting countries with limited buffers have started to adjust to the decline in oil prices.
The IMF reiterated the need for oil-exporting countries to enact prompt fiscal adjustments, even as it advised that oil importers’ policy stance should strike the right balance between promoting growth and preserving stability.
The report stated that oil price decline will have a severe impact on the region’s oil exporters, including Nigeria, with 2015 growth for those countries marked down by more than 21⁄2 percentage points.
In contrast, projected growth in the region’s oil importers is broadly unchanged, as the favorable impact of lower oil prices is offset to a large extent by lower prices of commodity exports.
It added that key downside risks include further downgrades to growth in major trade partners, a sharper-than-expected tightening of global financing conditions, and mounting domestic security threats and policy uncertainty ahead of elections.
According to IMF, oil-exporting countries should enact prompt fiscal adjustments, while oil importers’ policy stances should strike the right balance between promoting growth and preserving stability.
It stated: “Sub-Saharan African growth for 2014 as a whole remained solid at five per cent, albeit lower than the 5.2 per cent growth in 2013.
Growth in South Africa fell from 2.2 per cent in 2013 to 1.5 per cent in 2014, on account of mining strikes and electricity supply constraints. Elsewhere in the region, growth, driven by strong investment in mining and infrastructure and by private consumption, held up well, especially in the region’s low-income countries.
Exceptions were Guinea, Liberia, and Sierra Leone, where growth declined sharply as a result of the Ebola epidemic, which caused severe disruptions in agriculture and services and the postponement of mining development projects.” In addition, it noted that: “The region’s oil-exporting countries, especially those with limited buffers (Chad, Nigeria), started to adjust to the decline in oil prices.
This adjustment led to lower growth than was previously expected. By contrast, growth in the region’s oil-importing countries was broadly in line with previous projections, although with considerable variation across countries.
“Fiscal and current account balances worsened significantly in the region’s oil-exporting countries, reflecting ambitious infrastructure investment agendas financed with shrinking oil revenues. Fiscal balances also deteriorated in other parts of the region, reflecting continued fiscal strains in the Ebola-affected countries and strong exceptional spending in Mozambique.”