Oil prices could rise up to $100 a barrel, following attacks on Abqaiq facility and the Khurais oil field in Saudi Arabia on Saturday, experts and analysts project, as half of Saudi Arabia’s oil production went offline following the surprise drone strike.
The closure impacts 5 million barrels of crude processing per day, affecting 5 percent of the world’s daily oil production, the Kingdom’s oil company, Saudi Aramco said on Saturday, confirming the loss of more than half of its oil production.
With threats to oil supplies looming following the attacks, Brent Crude, the international oil benchmark against which Nigeria’s oil is priced, rocketed upwards on Monday, gaining as much as 20 per cent to $71 a barrel. Experts forecast that prices could go up as high as $100 – a level last seen in 2013.
Daily Trust reports that the potential rise in oil price comes as good news for Nigeria which has been struggling to meet revenue targets with an oil benchmark price of $60 per barrel set in the 2019 budget although prices had fallen below the projection for months this year.
The rise in oil prices means further accretion to Nigeria’s foreign exchange reserves, which experienced a slump from $43.6bn in August 2019, compared with $44.9bn in July.
Experts had previously told Daily Trust, however, that with the rise in oil price, the country would also have to spend more to import petroleum products as the landing cost would rise and consumers might have to brace up for a possible rise in fuel prices. The strike, which the US blames on Iran, has sparked fears of increased risk to energy supplies in the region.
On how the attack will affect petrol prices, international energy policy expert, Prof Nick Butler, told the BBC that drivers will not immediately see an increase at the pump.
“The direct impact of the attacks could be short-lived,” he said.
“The market has adjusted without blinking over the last two years to the loss for political reasons of over two millions barrels a day of production from Venezuela and Iran.”
But Mr Jeffery Halley, senior market analyst at Oando said the global fuel prices are likely to increase. “You’ll see price hikes in gasoline all over the world. Consumers will first notice it quite quickly in higher petrol prices.”
He also warned to “watch airline fuel surcharges” which could also rise, depending on an airline’s fuel price hedging policies.
Meanwhile, OPEC Secretary General Mohammed Barkindo has discussed the oil market development with the head of the International Energy Agency Fatih Birol on Monday after the attacks on Saudi oil facilities, an OPEC source told Reuters.
The two men expressed their satisfaction that “the situation has been brought under control by the Saudi authorities,” and agreed to continue to monitor the market and keep in regular contact over the next couple of days, the OPEC source said.
The source said holding an emergency meeting for OPEC and its allies now “was not on the table”, after the attacks on Saudi oil plants halved the kingdom’s oil output.
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