The international oil benchmark, Brent crude, on Tuesday continued its biggest losing streak since February, falling below $75 per barrel.
The downturn in oil prices came on the heels of worries that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall, with hedge funds reducing bullish positions in crude.
Brent, against which Nigeria’s crude oil is priced, dropped to $74.89 per barrel as of 6:40pm Nigerian time, while the United States’ West Texas Intermediate slumped by $1.50 to $66.38 per barrel.
Following the rally in crude oil prices, the National Assembly increased the oil benchmark price for the 2018 budget to $51 per barrel from $45 proposed by the Executive.
The Brent price has fallen nearly seven per cent since hitting $80.50 on May 17, its highest since November 2014.
“Investors have started pricing in the likelihood of Saudi Arabia and Russia increasing crude oil production. However, doubt remains, with any agreement to be finalised at the June OPEC meeting,” Reuters quoted ANZ Bank as saying in a note.
Ahead of the Organisation of the Petroleum Exporting Countries’ meeting in Vienna on June 22, concerns that Saudi Arabia and Russia could boost output have exerted downward pressures on oil prices, along with rising oil production in the United States.
Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by one million barrels per day to counter potential supply shortfalls from Venezuela and Iran.
Meanwhile, loading delays at Nigeria’s Forcados terminal have pushed above two weeks, according to market sources, with no official new loading programme for June or July released by the terminal’s operators, Platts reported on Tuesday.
Flows to the Forcados terminal reportedly resumed last week after repairs were made to correct a minor leak on the Trans-Forcados pipeline. But sources said delays had continued to mount, which had, in turn, impacted the release of a fresh schedule for June or a firm schedule for July.
A tentative rescheduling of the June cargoes has been making the rounds in the market, showing delays of up to two weeks. But trading sources said it seemed unlikely that the new dates would actually hold and actual delays were expected to be longer.
“Forcados is taking a bit of a battering reputationally,” a trader said. “Bigger buyers will always find a home for cargoes even with some uncertainty over cargo loading dates. But value can be affected as more marginal buyers look elsewhere to [minimise] their risk.”
Last Friday, Shell Petroleum Development Company of Nigeria Limited said it shut down production following the discovery of leaks on its 24-inch Trans-Ramos Pipeline in the swamps of western Niger Delta.
The pipeline, which supplies crude oil to the Forcados export terminal, has a capacity of around 100,000 barrels per day.
The shutdown of the Trans-Ramos pipeline followed the declaration of force majeure by the oil major on exports of Bonny Light crude, one of the country’s major sources of oil revenue, the previous week.
