Oil prices, for the first time in nearly seven months, scaled above $50 a barrel yesterday, due to growing disruptions in some Organisation of Petroleum Exporting Countries (OPEC) and decline in inventories in certain countries outside the cartel.
At above $50 per barrel, crude oil prices have finally strongly surpassed Nigeria’s budgetary benchmark of $38 a barrel.
Specifically, global benchmark – Brent crude futures rose by 1.2 per cent to $50.34 a barrel- the highest level recorded since November last year while U.S. West Texas Intermediate (WTI) was up by one per cent to $50.08 a barrel.
Brent had since mid-December 2015 continued to trade below the $38 per barrel mark. In January, it fell under $30 per barrel, its lowest in more than a decade.
Supply disruptions in Nigeria, Canada and Libya have been able to push Brent prices back above $50. In the lead-up to those outages, waning North American output helped drain a massive overhang in U.S. stockpiles, which eased from 80-year highs reached weeks ago.
But, there were fears that the strikes by French oil sector workers, which had led to the shutdown of many refineries, may result to fall in crude oil prices, as cargoes may be diverted to other ports, or of owners of physical barrels being forced to sell at steep discounts just to get rid of their cargoes.
Meanwhile, the International Monetary Fund (IMF) said in its latest economic outlook on sub-Saharan Africa that the sharp decline in crude prices has put severe strains on many of the largest sub-Saharan African economies.
It noted that oil exporters, which include Angola and Nigeria, continue to face difficult economic conditions, just like non-energy-commodity exporters, such as South Africa and Zambia.
According to IMF, most oil importers are generally faring better, with growth in excess of five per cent and even higher in countries such as Côte d’Ivoire, Kenya, and Senegal. In most of these countries, growth is being supported by ongoing infrastructure investment efforts and strong private consumption.
It said that the decline in oil prices has also helped these countries, though the windfall has tended to be smaller than expected, as exposure to the decline in other commodity prices and currency depreciations have partly offset the gains in many of them.
IMF stated: “For natural resource exporters, a robust and prompt policy response is needed given the prospect of an extended period of sharply lower commodity prices. To date, the policy response—particularly among oil exporters—to a terms-of-trade decline of historic magnitude has to a large extent been hesitant and insufficient. But with fiscal and foreign exchange reserve buffers limited and financing constrained, the required adjustment will happen, one way or another: the options really are between orderly and disorderly adjustment.”
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