Hope For 2016 Budget As Oil Price Rises, Hits $50 per barrel
Prices of oil, Nigeria’s biggest revenue earner, yesterday hit the $50 per barrel mark, the third time this year, raising recovery hope for the 2016 budget. The new price, which occurred four days after the Organisation of Petroleum Exporting Countries (OPEC) slashed its production for the first time in eight years, surpassed the 2016 budget oil benchmark by $12 per barrel. Nigeria’s 2016 budget was benchmarked at $38 per barrel against major criticism across the nation, following December 2015 prices of about $34 per barrel.
The price rise of Brent, against which half of the world’s oil is priced, had risen to around $48 per barrel on Wednesday after OPEC agreed to reduce production, compared to $45 earlier that day. It stood at $50.19 per barrel as of 4:53p.m., Nigerian time yesterday, up from around $49.66 per barrel on Thursday. Brent crude had, on June 8, climbed by as much as 2.1 per cent to touch $52.54, the highest price since last October. But it later fell to as low as $43 on July 27 after official United States energy data showed an unexpected glut of oil in storage.
Oil prices had rallied from lows of under $28 per barrel in January to trade above the $50 per barrel mark in June, spurred by a string of international oil production outages in the second quarter that offered temporary respite from the global glut.
Nigeria, Iran and Libya were granted exemption from a resolution by the Organisation of Petroleum Exporting Countries (OPEC) to cut members’ oil output by about 740,000 barrels per day by November 2016 to stabilise prices. OPEC agreed to cut production to a range of 32.5 million barrels per day to 33 million bpd from around 33.5 million bpd.
Incessant attacks by Niger Delta militants on oil and gas production facilities in the region resulted in a massive cut in the country’s oil production capacity by almost 50 per cent, from an average of 2.2 million barrels per day. The impact of the attacks has been a drastic drop in revenue earnings from oil exports, which has plunged the country into a major crisis underlining the current economic recession and the difficulty in funding the N6.06 trillion 2016 budget.