By Adedapo Adesanya
As markets continue to face the threat of coronavirus, which has plunged the global market into a negative territory, price of the Brent Crude has now fallen $6 below the Nigerian fiscal year oil benchmark of $57 per barrel.
Oil prices continued to head down alarmingly on Thursday, affecting the ability of the Nigerian government to raise funds from oil sales for the 2020 budget. Yesterday, the Brent crude, which is the international oil benchmark, shed over $4 to trade at $51.73 per barrel.
Earlier in the day, the futures reached its lowest level since December 2018 when it circulated around the $50 mark before paring some of the losses to settle at $51 by press time.
Also, the WTI crude fell further as it registered $46.49 per barrel after shedding 60 cents equivalent to 1.27 percent.
Crude oil has been facing pressure from the COVID-19, which has spread across Asia, the Middle East and Europe, causing panic and reducing demand due to restricted travel and slowdown of sales.
Globally, more than 80,000 people in nearly 50 countries have been infected. Close to 2,800 have died, with majority in China’s Hubei province where the virus originated from.
In some affected countries, several actions have been taken and this could only stifle activity more. Japan and Iraq have ordered schools to close – a measure already taken in mainland China and Hong Kong.
On its part, Saudi Arabia is stopping foreign pilgrims from entering the country. It is not clear if the Hajj pilgrimage, which begins in July this year, will be affected.
Iran has urged citizens to avoid making unnecessary trips within the country and cancelled Friday prayers in Tehran and other cities while Australia is extending a ban on foreign visitors from mainland China.
In Europe, Italy, where 17 people have died, has quarantined 11 towns and Greece is cancelling all carnival activities.
Prices continue to weigh on supply and falling demand and renewed fears surrounding the coronavirus and its impact on the global economy and analysts say the possible deeper output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a group known as OPEC+ is what can help the market now.
OPEC and its non-OPEC allies will meet in Vienna, its headquarters on March 5-6 but there is uncertainty over whether the entire group will agree to cut their collective oil output further as Russia is still hasn’t committed.
Even a Donald Trump address to Americans on Thursday was not enough to help the market but many hands point towards the March meetings by the cartel, with some confident that it can help prices while others wonder whether it is too late to act now as prices are expected to further go down.
Dipo Olowookere