Crude Oil Price Drops To $27.67 Per Barrel

The turmoil in the international oil market may be far from easing as the crude oil price plunged below $28 per barrel yesterday.

The free fall in crude oil price may further harm Nigeria’s 2016 budget which is currently benchmarked at $38 per barrel against a production estimate of 2.2 million barrels per day for 2016.

Also, Brent crude fell to fresh multi-year lows below $28 a barrel yesterday on fears of a worsening supply glut after sanctions on Iran were lifted, allowing the country to resume oil exports. But the U.S was said to have slammed fresh sanctions on the nation thereby creating uncertainty in its export plans.

Brent was down to $27.67 yesterday while OPEC daily basket price stood at $24.74 a barrel.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC) had on Sunday said it was ready to increase its exports by 500,000 barrels per day (bpd). As worries about Iran’s return to an already glutted oil market drove down oil prices, analysts believe that the fresh sanctions announced by US over its ballistic missile programme might change the tune of events in the international oil market.

Meanwhile, Iran has denounced the “illegitimate” new sanctions by the U.S on its ballistic missile programme, days after its historic nuclear deal with world powers was confirmed.

A Foreign Ministry spokesman, Hossein Jaber Ansari, said: “Iran’s missile programme has never been designed to be capable of carrying nuclear weapons,” He added that Tehran saw fresh economic sanctions as “illegitimate”.

The Minister of State for Petroleum Resources, Ibe Kachikwu, said as US lifted it sanctions on Iran, the world should hope for rises despite expectations that global crude prices would plummet even further.

Kachikwu, who is also the Group Managing Director of Nigeria National Petroleum Corporation (NNPC), in an interview session with the Cable News Network (CNN) business show, ‘Quest Means Business’ had said that oil prices would rebound to average of $40-50 dollars per barrel by the end of 2016.

He said: “I don’t expect to see the price of oil falling to $20 dollars per barrel; I expect it to hover around $30 or thereabouts for about a month or two and then it should begin to climb. I am optimistic that the prices will close at an average of $40-$50 dollars per barrel by the end of 2016 but Q1 is bound to be tough. The current price is not really a surprise, although the prices fell more rapidly than we expected. Our initial projections were not less than $35 per barrel.”

According to him, Nigeria should not be considering cutting production at this time but rather look inwards to how it could revive refineries and other domestic utilisation options.