Oil prices traded within striking distance of its seven-year high at $86.71 per barrel yesterday on continuing supply constraints and waning fears among heavy fuel users of another pandemic-induced slowdown.
In the last two weeks, Brent, Nigeria’s benchmark, has climbed more than 10 per cent to as much as $86.71 a barrel, exceeding last October’s high, to levels not seen since 2014 when oil topped $115.
On the other hand, the United States oil marker, the West Texas Intermediate (WTI) has risen more than 12 per cent since the start of the year, to hit a high of $84.78, just under last year’s peak.
Nevertheless, the rising oil prices is more of bad news for Nigeria which should ordinarily earn more foreign exchange from the sale of crude, but now has to deal with paying more for petrol subsidy which had been described as a drain on its economy because there’s a positive relationship between the international prices of the commodity and how much Nigerians get the product at the pump.
In the meantime, some analysts are forecasting that the crude benchmarks would trade at more than $100 a barrel again this year unless there is a significant increase in supply.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies had stuck to a plan agreed in July last year to replace output cut at the start of the pandemic gradually, by just 400,000 barrels a day each month, despite calls by major crude oil consuming nations like the United States to increase production. Generally, the strategy has helped oil prices move higher since August, and to recover quickly after the rapid spread of the Omicron coronavirus variant in November.