NIGERIA has received a minor and temporary economic respite as global crude oil prices rallied slightly today due to an approaching tropical storm in the Gulf of Mexico that has prompted drillers to evacuate rigs and shut-in production.
Since the outbreak of the coronavirus pandemic, Nigeria has been in dire straits as the economic shutdown led to a collapse in both crude oil demand and prices. With Nigeria’s 2020 budget predicated on the government selling 2m barrels of oil a day at $58 a barrel, national revenue was hot hard as prices fell dramatically, dropping to $0 at one point before rebounding.
Over the weekend, however, there has been a slight rally with the price of Brent crude, which is identical to Nigeria’s Bonny light crude rising by six cents to $39.89 a barrel. These gains are still muted by concerns about excess global supplies and falling fuel demand but they still offer some respite to the Nigerian government that is having to borrow to fund its 2020 budget.
Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida yesterday and was poised to become a Category Two hurricane. This storm is disrupting oil production for the second time in less than a month after Hurricane Laura swept through the region.
Typically, oil rises when production is shut down but with the coronavirus pandemic getting worse, demand concerns are to the fore, while global supplies continue to rise. However, the US is the world’s biggest oil consumer and producer, so if supply disruptions there continue, it may have a long term impact on global stocks and prices.