Crude oil price hits $97 per barrel, the highest so far in 2023

A recent assessment of oil prices conducted on Thursday, September 28 at 5:00 AM (GMT+1) revealed that Brent crude had surged to $97.24 per barrel, marking its highest point since November 2022.

This substantial price increase was propelled by an upswing in demand and a noticeable reduction in the crude oil supply.  

It is worth noting the pivotal role played by Saudi Arabia and Russia in this surge, as they had previously announced oil production cuts scheduled to persist until the end of 2023, with monthly reviews to assess the situation.

As we approach the upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) on October 4, market analysts anticipate a thorough evaluation of market dynamics and a potential reconsideration of supply levels and prices by the producers.  

However, according to a report by Reuters, Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, underscores that the oil market is rapidly realizing the profound impact of the OPEC+ cuts declared during the summer on the availability of crude.  

He said: 

• “Stocks are drawing while demand keeps growing. We are still far away from a price level causing demand destruction.”

Is a $100 per Barrel threshold imminent?

Anticipations are running high as analysts project the possibility of crude oil prices surging to and potentially surpassing the $100 per barrel mark.

However, this surge might not be sustained over an extended period.  

Nonetheless, if prices do breach the $100 per barrel milestone, it could spell negative repercussions, particularly for developing nations.

Mark Zandi, chief economist at Moody’s Analytics, emphasized the concerning outlook, stating that any prolonged period with oil prices above $100 could severely afflict the industry. 

It’s important to emphasize that, as per expert analyses, a global crude price resting at $100 per barrel would exert considerable strain on economies characterized by weaker currencies and diminished cash flows, obliging them to purchase dollar-denominated oil.

This scenario paints a grim picture, with the potential to profoundly impact both worldwide economies and energy markets. 

The Nigeria context

In Nigeria, fuel subsidy termination was anticipated for May 2023 following the President’s public announcement.

However, the recent surge in global crude prices, coupled with ongoing foreign exchange market turmoil, has reignited discussions about the presence of fuel subsidies.  

This speculation stems from the fact that fuel pump prices continue to range from N615 to N620 per litre, even as the nation remains dependent on imported refined petroleum products.

On Wednesday, September 27, Nairametrics found that diesel prices were getting close to N2000 per litre in certain parts of the country.  

Despite this, fuel pump prices have not experienced a corresponding increase, indicating a government intervention in stabilizing prices.

With Brent crude inching close to $100 per barrel, a pressing question arises: will the government persist in maintaining artificially controlled fuel prices?  

It’s imperative to note that Nigeria is grappling with a pressing need for revenue, prompting a critical evaluation of whether camouflaging fuel subsidies serve the country’s public finance better than prioritizing augmented oil production to capitalize on the current upswing in crude prices. 

In a recent Nairametrics webinar held on September 23, focusing on an analysis of President Tinubu’s initial 100 days in office, Chika Mbonu, the Managing Director and Chief Executive Officer of KSBC Advisory Partners Limited, underscored the urgency for the Federal Government to confront present challenges and enhance the nation’s oil production.  

Mbonu stressed that this imperative action is pivotal for refining and fortifying the nation’s public finance, encompassing effective revenue generation and astute expenditure management.

The delicate balance between subsidizing fuel prices and bolstering the nation’s economic prospects calls for strategic decisions to secure Nigeria’s financial stability amidst a changing global energy landscape.