This surge in price is primarily attributed to the effects of extended output cuts in the global oil market.
Russia, in a bid to support price stability, prolonged its voluntary cut in crude oil exports by 300,000 barrels per day until December 2023. In a similar move, Saudi Arabia extended its daily supply cut of 1 million barrels into October 2023. These efforts by major oil-producing nations have contributed to the increase in crude oil prices.
Notably, this price hike marks the highest level for oil prices in 2023, surpassing the 2023 budget benchmark price of $75 per barrel by a considerable margin.
Furthermore, Goldman Sachs Commodities Research has predicted that ongoing oil supply cuts could potentially drive oil prices up to $107 per barrel by 2024.
In an interview with Financial Vanguard, Professor Omowumi Iledare, a sector analyst and Executive Director of the Emmanuel Egbogah Foundation, emphasized that Nigerians and others should anticipate further price increases.
He pointed out that this trend is expected due to rising demand, declining supply caused by geopolitical factors, and critically low oil inventories in the United States. Additionally, the replacement of oil reserves is occurring at a slow pace, posing a risk to future supply and further supporting price increases.
Similarly, Professor Felix Amieyeofori, the lead promoter of EnergyHub Nigeria, echoed these sentiments, suggesting that oil prices crossing the $100 per barrel mark is very possible. He highlighted the global shift towards renewable energy sources and decreased investments in the oil sector as factors contributing to this price surge.
He also noted that consumers might experience higher petrol prices as refiners, who are currently paying more for crude oil, may transfer these increased costs to end-users.
It's essential to recognize that Nigeria has been identified by OPEC as its least refining member, with relatively low refining capacities. The country's refining output has remained modest, averaging around 10,600 barrels per day over the past five years, according to OPEC's Annual Statistical Bulletin for 2023. In contrast, Saudi Arabia has consistently ranked as OPEC's top refining member, with an average equivalent of 2.6 million barrels per day during the same period.
