Stakeholders fear the worst as Oil prices drop to $59 per barrel

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In October crude oil prices increased from $70.00 to $85.00 per barrel much to the pleasure of stakeholders in the Nigerian oil and gas sector. The rise was expected to boost investment, and by extension encourage improved funding for local content development. The improved funding was also expected to culminate in award of new contracts and settlement of debts owed local contractors and others in the industry. But the expectation was short-lived as the price soon dropped to $75.00, before sliding further to the current $59 per barrel. The relatively low price which is partly fuelled by excess supply has started to impact negatively on local content development, especially as operators found it difficult to do major projects and programmes. Investigation showed that many indigenous operators, including service providers found it difficult to survive mainly as a result of low patronage by the majors, including the International Oil Companies (IOCs) and independents.

In a recent interview the chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Bank-Anthony Okoroafor, said: “Oil is now under $60 a barrel, a drop of about one third which is as a result of excess supply in the USA (boom in shale supply), surge in Saudi and Russia supply and Chinese oil inventories rising quite significantly. We are barely walking a tight rope.” Okoroafor had said in an earlier interview that Nigeria’s oil and gas industry was facing a lot of problems, including insecurity, corruption and lack of transparency.

Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC), has concluded plans to meet in Vienna, Austria, this week in order to review the market as well as adopt measures that could assist in achieving market stability. Many members, including Nigeria and Saudi Arabia have expressed commitment to achieving stability. The Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al-Falih who visited Nigeria last week said: “As we meet in a week’s time, our focus again will be on fundamentals of supply, demand and inventories and trying to bring that back to a level that will show the market that we have been talking about. I think that would include American producers as well, who are quite troubled today as they prepare for their 2019 budget about continuous building inventories and lack of clarity on where the market is going in 2019.

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