Pump Price of Petrol to Rise as Brent Crude Hits $57.38 per Barrel

Pump Price of Petrol to Rise as Brent Crude Hits $57.38 per Barrel

In line with what looks like a partial deregulation of the downstream oil sector, analysts have projected that pump price of petroleum motor spirit, PMS, may be adjusted upward as global prices of oil maintain uptrend.

Read More: Nigerians to Pay More for Petrol as Oil Prices Rise

On Wednesday, Brent crude price in the international market peaked at US$57.38 per barrel amidst renewed uptrend in the global oil market.

This surge follows the recent announcement by Saudi Arabia to voluntarily cut its oil production by one million barrel per day (mbpd) in February and March above its current quota.

Also adding to the momentum is the news of a further fall in the United States supply of the commodity to the market.

This creates an artificial add-on to the cartel’s most recent cut, says analysts at CSL Stockbrokers.

The firm however ask if this bode well for the country considering Nigeria’s economic frailties amid the pandemic’s lingering impact.

This year, the appropriation bill tagged “Budget of Economic Recovery and Resilience” was passed into law with total expected revenue for the 2021 fiscal year estimated at N7.99trillion.

Analysts stated that is 36.9% higher than the N5.84trillion projected in the 2020 bill..

Underscoring the projected revenue is an oil price assumption of US$40/ barrel and production of 1.86mbpd.

In the note, analysts said the logistic concerns around the mass deployment of the coronavirus vaccines amid the rising number of cases and emergence of new strains have heightened the risk of another round of lockdowns globally.

“The consequent impact on oil prices might force the country into another round of economic crunch”, CSL Stockbrokers hinted.

Examining the impact on the Nigerian economy, the firm thinks an above US$40/bbl Brent price remains healthy for the 2021 budget revenue projections which is critical to achieving the historic revenue numbers projected in an ambitious budget.

However, analysts retain grave concerns on Nigeria’s external conditions and consequently, exchange rate.

“We think the prolonged weakness in oil prices would drag on export receipts and thus FX earnings”, CSL Stockbrokers explained.

On the other hand, it noted that an increase in oil prices imply an increase in the price of petrol which may either mean a further upward adjustment in petrol prices or a return to the subsidy regime.

That said, analysts reiterate the firm’s age long clamour for economic managers to adequately diversify the country’s export earnings particularly exploring opportunities in mining and agriculture.

It said furthermore, investments and business regulations to accelerate local industrialisation which would foster local production of many imported products would significantly help to reduce dependence on imported products and thus conserve scarce FX.

Read Also: Deregulation: We no longer fix price of petrol – PPPRA

Pump Price of Petrol to Rise as Brent Crude Hits $57.38 per Barrel