The price of crude declined further to $82.96 yesterday increasing apprehension over the 2015 budget proposal put forward by the federal government.
Meanwhile, the Nigeria Stock Exchange, NSE All Share Index dropped to 13-month low and government bonds fell yesterday as foreign investors pulled out of Nigerian assets, prompting the central bank to sell intervene in the foreign exchange market with special foreign exchange sales, to save the naira from depreciation.
Yesterday, the price of global benchmark crude oil, Brent crude fell by $1.82 to N82.96 per barrel, its lowest since October.
This was triggered by the decision of Saudi Arabia to cut sales price of crude oil to the United States. U.S light crude dropped by $2.00 at $76.78 a barrel, after going to as low as $75.84 per barrel in the day’s trading, it’s weakest since October 2011. Light crude discount to Brent hovered around $6.
The Federal Government had a couple of days ago, proposed $78 as the benchmark for the 2015 appropriation against the $77.5 per barrel in 2014.
The Federal Government in the 2015-2017 medium term expenditure framework, MTEF, and FSP also has the oil production projection at 2.2782 million per barrel daily, mpbd, which is lower than the 2014 oil production projection of 2.388mbpd.
Saudi Arabia increased its December official selling prices (osps), relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market.
“This is mixed news, and the fact that the positive angle has not made an impact shows that market sentiment is very negative at the moment,” Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt, said.
Reuters reported that a growing supply glut in the United States has led more than a dozen oil producers to create a new lobby group, Producers for American Crude oil Exports (PACE), which seeks to end the country’s 40-year ban on crude exports.
U.S. commercial crude stocks are likely to have risen last week, according to a survey by Reuters, which if confirmed will be the fifth consecutive weekly stock build.
Reuters further stated that the absence of clear signs that the Organization of the Petroleum Exporting Countries (OPEC) could curb output at its November 27 meeting also weighed on prices.
Less than one month before the meeting, there is no consensus among trading houses as to whether OPEC members will agree on a cut, it stated.
“I can see OPEC and Saudi Arabia playing the long game. a low price for a period of time may actually play into the hands of people with a lot of reserves in the ground at cheap cost,” Pierre Lorinet, chief financial officer of Trafigura, said at the Reuters global commodities summit.
Ian Taylor, chief executive of Vitol, said at the Reuters summit that OPEC members would have “serious discussions” about an output cut.
“My feeling is we’re underestimating now the possibility of OPEC cutting,” he said.
”Members Venezuela and Ecuador are working on a joint proposal to defend oil prices, but the united arab emirates oil minister said the country is “not panicking”.
Ali Al-Naimi, the oil minister of OPEC‘s largest producer Saudi Arabia, has made no public comment on the oil market since September.