Crude Oil Soars Above $54 Per Barrel

Nigeria’s 2017 $42.5 per barrel budget benchmark may get upward review as oil price climbed to $54.94 per barrel yesterday, following last week’s Organisation of Petroleum Exporting Countries (OPEC) landmark deal to cut production.

President Muhammadu Buhari, will on December 14, be presenting a budget proposal of N7.28 trillion on a benchmark of $42.5 hinged on a daily oil production of 2.2 million barrels per day.

Crude price had on Monday rose above $55 a barrel as rising prospects of a tightening market, after last week’s OPEC landmark deal to cut production gave speculators impetus to increase bets on higher prices.

Monday’s gains take the rally since the Organisation of the Petroleum Exporting Countries’ (OPEC) agreement was struck on Wednesday to 19 per cent for Brent and 16 percent for US crude.

Last week’s 12.2 per cent increase was the largest one-week rise since February 2011.

Meanwhile, OPEC will achieve some, but not all, of the production cuts the organisation agreed last month, according to an informal survey of energy professionals conducted after the agreement was announced.

Most energy professionals expect OPEC output will decline to around 33 million barrels per day in January 2017, down from 33.6 million bpd in October, but well above the deal’s target of 32.5 million bpd.

Most of the 260 respondents to the survey think the organisation will succeed in cutting output, but on average by only 600,000 bpd, or half its stated target of 1.2 million bpd.

Less than 8 per cent thought OPEC would achieve its target in full. More than twice as many thought output would stay the same or rise.

Skepticism about OPEC’s ability to meet its target underlines the challenge facing the organisation as it tries to reduce global oil stocks and raise prices next year.

Saudi Arabia and its allies Kuwait, Qatar and the United Arab Emirates have pledged to cut their combined production by almost 790,000 bpd with effect from January.