Brent crude oil price gained 1.10%, to trade at $38.73 per barrel on Tuesday. This is double the recent record low, couple of weeks back. Thanks to oil production cuts by OPEC+ (Organisation of the Petroleum Exporting Countries), the Russians, Saudi Arabia, and other Western oil producers.
Investors are anticipating a crude oil price as the wait for a virtual meeting expected to hold this week because of the production cut.
Commonwealth Bank commodities analyst, Vivek Dhar, told Reuters. “The whole story is very much based around the supply cuts and the demand recovery.”
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How It Affects Nigeria
This is indeed great news for oil-producing countries, especially a country like Nigeria. A country where crude oil makes about 90% of Nigeria’s foreign exchange earnings. More than two-thirds of government revenue also comes from the downstream sector.
We know that the effects of COVID-19 and Russia’s refusal to cut oil production during the first OPEC+ meeting in recent weeks wreaked havoc on Nigeria’s financial system and the economy at large.
This new development in the industry has indeed had a positive impact on Nigeria’s reserve. It saw an increase of $36.12 billion from $33 billion a few months ago.
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“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” said Citi’s head of commodities research Edward Morse.
There was an agreement by OPEC+ in April to cut supply till May/June, so as to reduce oil production to 7.7 million barrels per day from July through December.
“An extension could push oil prices to $40, but there would have to be a follow-through on that commitment to sustain higher prices,” said Commonwealth Bank’s Dhar.
Saudi Arabia has been in support to push for extending the heftier cuts. We only hope that Russia wouldn’t be an obstacle to this extension. Their refusal to agree to the oil production cut, during the first OPEC+ meeting led to the low crude oil price.
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