Omoh Gabriel
3 October 2011, Sweetcrude, Lagos—Oil prices are heading for further drop to the 2008 low levels as investors speculated that global economic growth will slow and curb fuel demand amid rising supplies.This has serious implication for Nigeria’s 2012 budget which is predicated on $75 per barrel.
If prices of crude tumble as a result of slow down in global economy, Nigeria may face serious financing gap for President Goodluck Jonathan’s economic transformation agenda. It would mean that Minister of Finance and Coordinator of the Economy, Dr. Ngozi Okonjo-Iweala’s plan to reduce budget deficit may not be realised.
Oil prices in New York, weekend, headed for its biggest quarterly drop since 2008. Crude stockpiles rose 1.92 million barrels last week, the U.S. Energy Department said.
Morgan Stanley cut its Brent oil forecast to $100 from $130 on weaker demand and increasing OPEC production. Indications are that Chinese growth is poised to ease.
“We’re trading from headline to headline and that’s all markets, not just the oil market,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney.
“The gap is closing between Brent and West Texas and that could be an indication that there is some easing in the supply-side concerns from the Middle East.”
Crude for November delivery was at $81.15 a barrel, down six cents, in electronic trading on the New York Mercantile Exchange at the close of business last week after falling as much as 1.9 per cent. The contract slid 3.8 per cent to $81.21. Futures are down nine per cent this month and 11 per cent this year. The quarterly decline is the biggest since the last three months of 2008.
Brent oil for November settlement was at $103.94 a barrel, up 13 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.79 to New York crude, compared with a record of $26.87 on September 6. Economic growth in China, which consumes about a tenth of the world’s oil, will slow to less than five per cent annually within five years, according to most investors. Growth was 9.5 per cent last quarter.
The European Union accounted for about 16 per cent of global oil demand last year, according BP Plc’s annual Statistical Review of World Energy.
German lawmakers voted on Friday on an expansion of the euro area’s rescue fund as the region’s governments weigh further measures to support Greece.
Crude inventories climbed for the first time in four weeks in the U.S., the world’s biggest user of the commodity, which accounts for about 21 per cent of demand. Gasoline stockpiles rose 791,000 barrels in the week ended September 23, the Energy Department report showed. Production capacity in the Organisation of Petroleum Exporting Countries will climb almost 800,000 barrels a day in 2012, led by the resumption of Libyan fields, Morgan Stanley analysts led by New York-based Hussein Allidina said in a report on Friday. Slowing global economic growth will curb demand, the analysts said.
Libyan crude production may reach as much as 400,000 barrels a day next month, Citigroup Inc. analysts including Edward Morse said. Fighting in Libya since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.
