Nigerian crude traded at a premium, above $80 a barrel, despite moderation in China’s inflation rate and an opaque situation surrounding the country’s economic stimulus plans, which have triggered concerns about energy demand in the world’s biggest crude oil importer.
Nigeria’s Brass River, Bonny Light, and Qua Iboe last traded at $81 per barrel at the time of publication, much higher than the current Brent contract, as oil traders consider China’s weak economic data.
The oil market’s upside is restrained by concerns that a slowing Chinese economy may reduce demand, as well as growing optimism that the U.S. Federal Reserve might start lowering its benchmark interest rate as early as September.
Official statistics released on Saturday showed that China’s deflationary pressures worsened in September, and a press conference on the same day left investors wondering how substantial a stimulus plan would need to be to turn things around in the world’s second-largest economy.
Although the U.S. has warned Israel against attacking Iranian energy infrastructure, negative news from China has overshadowed market worries about the persistent threat that an Israeli response to Iran’s Oct. 1 missile launch could hamper oil supply.
According to China’s National Bureau of Statistics, the production price index dropped 2.8% year-over-year, marking the sharpest decline in six months, while the consumer price index fell short of forecasts.
U.S. West Texas Intermediate crude futures dropped by over 100 basis points to $74.56 per barrel at the start of Monday’s trading session in London, while Brent crude futures fell $1 to $78 per barrel.
Both major oil benchmarks lost all their gains from the previous week, dropping more than 1.5% per barrel before recovering some ground. Last week, WTI rose $1.18, and Brent gained 99 cents.
Nigeria’s oil production receives a boost
According to the federal government, the ongoing Floating Production Storage and Offloading (FPSO) facility in Lagos is expected to produce an additional 40,000 barrels per day, increasing the nation’s existing output.
The Nigerian National Petroleum Company Limited (NNPC) and Century Nigeria Limited have partnered with Enserv and WAEP, an engineering, procurement, and construction (EPC) firm, to undertake the project as a joint venture (JV).
Speaking at a project inspection in Lagos, Senator Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), praised the initial progress of the work.
The minister expressed satisfaction with the advancements made, highlighting the facility’s potential to boost Nigeria’s crude oil production by an additional 40,000 barrels per day, according to his spokesman, Nneamaka Okafor.
Under President Bola Tinubu’s directive for greater output, the minister stated that the FPSO project was one of the initiatives resulting from his engagement with NNPC Limited.
Updated petrol prices hurt Nigerian residents’ earning power
Nigerian residents are facing a fresh fuel price hike this month, with major cities experiencing significant increases. In Lagos, Nigeria’s business capital, the price of a liter of petrol rose by 17%, from 855 to 998 naira ($0.62).
- In Abuja, the federal capital, and Kano, the major northern city, the price was even higher at 1,030 naira per liter.
- This price increase follows President Bola Ahmed Tinubu’s controversial elimination of fuel subsidies after taking office in May 2023.
- Gasoline prices, which were previously below 200 naira per liter, have tripled due to this policy, implemented to lessen the financial strain on the state.
- The Tinubu-led administration hopes to attract long-term foreign investments despite the significant immediate effects on disposable income.
- The country, which already faces a high unemployment rate and widespread poverty, could witness a rise in social unrest in the coming months.