The price of the Brent crude oil at the international market extended its decline on Wednesday, trading below Nigeria’s $60 per barrel budget benchmark.
Brent, against which Nigerian crude oil is priced, further dipped by $2 to settle at $57.38 per barrel as at 9 p.m on Wednesday. It has continued to plunge. The crude traded around $61 per barrel last Thursday from $65 on Wednesday.
The 2019 budget, which was signed by President Muhammadu Buhari in May, was based on oil production of 2.3 million barrel per day (including condensates) with an oil benchmark price of $60 per barrel.
Brent crude hit a record high of $86.74 per barrel in October 2018, a development that spurred the Federal Executive Council (FEC) to peg the price of crude oil for the 2019 budget at $60 per barrel, up from $50.5 for the 2018 budget.
However, Brent plummeted in November, trading below the $60 per barrel mark, with some experts saying that the government would need to review the oil price benchmark downwards.
Brent crude plunged by more than seven percent to its lowest level in about seven weeks after the United States’ Federal Reserve dampened hopes for a string of interest rate cuts and as rising US output helped keep the market well supplied.
Brent has plunged more than 12 percent since last week as global equity markets went into a tailspin after U.S. President Donald Trump said he would slap a 10 percent tariff on a further $300 billion in Chinese imports from September 1, 2019.
Yesterday, U.S. West Texas Intermediate (WTI) crude futures declined by 2.5 percent to settle at $52 a barrel.
Oil fell early on worries about the trade war, then extended losses after U.S. government data showed a build of 2.4 million barrels in U.S. stockpiles instead of the 2.8 million draw analysts had expected. U.S. crude oil inventories are about 2 percent above the five-year average for this time of year.
Mr Trump on Tuesday dismissed fears that the trade row with China could be drawn out further. Still, U.S. stock indexes tumbled more.
Demand for safe-haven assets such as government debt underscored lingering anxiety over recession risks.
Tensions in the Middle East remained high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.
