Oil price hits $58, highest in 2019, as Saudi Arabia cuts output by 500,000 bpd

For the first time in 2019, crude oil price, yesterday rose from $56.00 to $58 in the international market, as Saudi Arabia cuts output by 500,000 barrel per day, bpd. Specifically, the price of many light crudes, including Nigeria’s Bonny Light hit the roofs at $58.00, while the price of Brent, West Texas Intermediate, WTI and the Organisation of Petroleum Exporting Countries, OPEC basket of 15 crudes stood at $57.73, $48.66 and $52.17 respectively. The latest price, apparently the highest in 2019, showed $2.00 below the $60.00 per barrel benchmark of Nigeria’s 2019 budget.

The price of oil which rose to as high as $85 per barrel in October, 2018, dropped to less than $50.00, thus threatening the implementation of the budget, before leaping to the current level.

President Muhammadu Buhari had while presenting the budget to the National Assembly said: “The 2019 Budget Proposal is intended to further place the economy on the path of inclusive, diversified and sustainable growth in order to continue to lift significant numbers of our citizens out of poverty. The underlying drivers of the 2019 revenue projections have been adjusted to reflect current realities.

“On the expenditure side, allocations to Ministries, Departments and Agencies of Government were guided by the 3 objectives of the ERGP, which are, (i) Restoring and Sustaining Growth; (ii) Investing in our People and (iii) Building a Globally Competitive Economy.

“The 2019 Budget proposal is based on the following assumptions: Oil price benchmark of $60 per barrel; Oil production estimate of 2.3 million barrels per day, including condensates; Exchange rate of N305/$; Real GDP growth of 3.01 percent; and Inflation Rate of 9.98 percent. Notwithstanding the recent softening in international oil prices, the considered view of most reputable analysts is that the downward trend in oil prices in recent months is not necessarily reflective of the outlook for 2019.

“However, as a responsible Administration, we will continue to monitor the situation and will respond to any changes in the international oil price outlook for 2019. With regard to oil production, I have directed the NPPC to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day.”

Meanwhile, a source in OPEC, who preferred not to be named because he was not permitted to speak, expressed hope that stability was about to return to the volatile market, as a result of the efforts of OPEC and non-OPEC members.

In a recent statement sent to Vanguard, OPEC had stated: “Accordingly, the 5th OPEC and non-OPEC Ministerial Meeting, following deliberations on the immediate oil market prospects and in view of a growing imbalance between global oil supply and demand in 2019, hereby decided to adjust the overall production by 1.2 mb/d, effective as of January 2019 for an initial period of six months.

“The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the ‘Declaration of Cooperation’ will correspond to 0.8 mb/d (2.5%), and 0.4 mb/d (2.0%), respectively.”

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