Recently, the oil futures of Nigeria, namely Brass River and Qua Iboe, saw an increase in value due to rising tensions in the Middle East and between Russia and Ukraine, as well as a decrease in the number of rigs in the United States, all contributing to a rise in prices. March 25, 2024, saw an increase in the prices of two types of crude oil. Brass River, known for its sweet medium light quality, rose by 0.53 percent to reach $89.73 per barrel. Similarly, Qua Iboe, a light sweet crude grade, also saw a gain of 1.6 percent to trade at $89.73 per barrel.
ExxonMobil taps into several offshore fields to extract Qua Iboe, shipping it out through the Qua Iboe Terminal. This particular type of oil is renowned for its top-notch quality and minimal sulphur levels, making it a preferred option for those in the refining industry. The increase can be explained by a mix of reasons, such as the limited availability of oil in physical markets, the agreement made by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations to continue reducing production, the growing need for oil from major consumers globally, and rising political conflicts around the world.
Ukraine has been targeting Russian oil infrastructure in series of attacks.
Also, the president of NS Trading, a division of Nissan Securities, expressed worries about the impact of increasing political conflicts on oil supply worldwide. Hiroyuki Kikukawa highlighted the growing tension in geopolitics, the surge in energy facility attacks in Russia and Ukraine, and diminishing hopes for peace agreements in the Middle East. He expressed concerns about the dwindling number of rigs in the United States and how this was causing alarm over potential supply shortages. Kyiv announced on March 24, 2024, that Russia had targeted vital infrastructure in the western region of Lviv in Ukraine, launching missiles in a significant air assault. The incident also involved a Russian cruise missile briefly crossing into Polish airspace, as reported by Warsaw officials.
Kyiv reported that a total of 57 missiles and drones were deployed by Moscow in the recent attack, which included an assault on the capital Lviv. This occurred just two days following the most significant aerial bombardment on Ukraine’s energy infrastructure in over two years of all-out warfare. Ukraine has been targeting Russian oil infrastructure in a series of attacks, using drones to hit at least seven refineries in the past month. The latest move was prompted by the ongoing conflicts between the two nations.
Rise in oil prices means that NNPC will bear the burden of fuel subsidies.
Over the weekend, medical teams at two Gaza hospitals in the Middle East were trapped by Israeli forces amidst intense gunfire, according to the Palestinian Red Crescent. Israel reported that nearly 500 militants had been apprehended during ongoing confrontations at the Al-Shifa hospital in Gaza. Despite the potential benefit of increased funding for the country’s 2024 budget due to higher crude oil prices, the country’s inability to meet production quotas is hindering its ability to generate additional revenue from oil sales.
More so, this is problematic as the country’s production levels have been on a downward trend, making it difficult to capitalize on the rising oil prices set at $77.96 per barrel in the budget projections. An increase in oil prices means that the Nigerian National Petroleum Company Ltd will also have to bear a greater burden in providing subsidies for petrol. The retail price of petrol has been capped by the Federal Government, despite the fact that the cost of importing it has exceeded the pump price. This has led to the belief that the government is now providing a subsidy for petrol.
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According to energy analyst Charles Akinbobola from Lagos, Nigeria’s petrol subsidy bill is on the rise due to a mix of factors such as an increased exchange rate, higher oil prices, and stagnant retail petrol prices. This is exacerbated by the country’s lack of refining capacity, forcing it to rely on imports for all petroleum products used domestically. He further stated that the petrol subsidy program in Nigeria is a topic of debate. Although it aims to help consumers deal with high fuel prices, the actual expenses and how it is funded are frequently kept hidden from the public eye.
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