Despite the slide of the crude oil reference price for Bonny Light to about $12 per barrel last week, Nigeria remains optimistic the situation at the international oil market would still rebound.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, in an interview with PREMIUM TIMES on Saturday in Abuja said the intervention of the Organisation of Petroleum Exporting Countries(OPEC) and its allies will soon lead to a rebound of oil prices.
According to Bloomberg, the price of bonny light, Nigeria’s premium oil grade, crashed from about $28 to $12 or $13 a barrel last week.
The news organisation said its data was provided by traders monitoring the West African market.
The present price of bonny light is well below the cost of production for Nigerian crude producers which is about $22 a barrel and also lower than the country’s crude benchmark of $30 per barrel.
This poses a fresh threat for Nigeria as it depends on crude sales for half of its revenue and 90 per cent of foreign exchange earnings.
About a week ago, faced with the grim reality of the impact of the current coronavirus pandemic which drove the global crude oil price to below 18 year’s low level, OPEC and its allies including Russia, resolved to undertake a cut of about 10 million barrels per day from their members’ oil production.
Considered the largest cut by OPEC in recent times, the cut in global oil supply was aimed at stabilising the market and bringing to a halt the spiralling decline in crude oil prices.
However, since the intervention, crude oil price continued a back and forth movement, indicating continued adjustment in search of the desired stability in the market.
The pattern may be as a result of the partial and total lockdown of economic activities in many countries in order to curtail the spread of the pandemic.
Also, traditional European buyers have stopped purchasing because the demand there has virtually collapsed.
In the interview with PREMIUM TIMES, Mr Kyari, who is also Nigeria’s National Representative in OPEC, said he remained optimistic the market conditions post-OPEC intervention will rebound and stabilise.
“The $12 per barrel (quoted on Friday in a Bloomberg report) is in reference to the benchmark or lowest possible price of a specific day last week, minus $4 discount.
“This is the market reality today after the recent output cut by OPEC+. But, I am optimistic it will rebound with the supply cut. “Yesterday (Friday) it was $28 ($24 less discount),” Mr Kyari said on Saturday.
He said crude oil price is very mobile at the moment, as the market conditions are yet to rebalance since the recent OPEC+ decision to cut output.
Bonny Light is Nigeria’s premium reference blend of sweet crude in the international market similar to the popular Brent crude. It is produced largely in the Niger Delta region.
Aside bonny light, other crude grades of the country are Forcados, Qua Iboe and Brass River.
source: Premium Times