By Adedapo Adesanya
The price of the Brent crude oil rose by 30cent or 0.59 per cent on Wednesday to trade at $51.07 per barrel at the global market for the first time since March.
This will be good news to Nigeria, which depends largely on crude oil sale to generate revenue to fund its budget. The country set its oil benchmark for the year at $40 and at $51, it is making an extra $11.
Yesterday, the Energy Information Administration (EIA) reported a decline in the United States stockpiles by 3.1 million barrels for the week to December 11 and during the trading session, the price of the US futures, the West Texas Intermediate (WTI) crude, appreciated by 0.38 per cent or 19 cents to trade at $47.80 per barrel.
The EIA report came out a day after the American Petroleum Institute (API) estimated inventory builds which pressured prices. It reported a build in crude oil inventories of 1.9 million barrels for the week ending December 11.
Analysts had expected the EIA to report a 3.5 million barrels decline in crude oil inventories for the period after it estimated a huge build of over 15 million barrels for the previous week.
The gains outweighed worries about demand as several European countries reinstated or tightened their movement restrictions, despite the upcoming holidays, to stem the spread of the coronavirus.
On Wednesday, Germany entered a strict lockdown as the number of registered deaths from COVID-19 jumped by the highest daily increase yet.
The new German lockdown will run from December 16 to January 10, but there will be a slight easing over Christmas when one household will be able to host a maximum of four close family members.
France has lifted its national lockdown, but the government said the infection rate had not lowered sufficiently for further easing. This means theatres and cinemas will remain shut as will bars and restaurants. A 10-hour nationwide curfew will also be imposed and will be lifted on Christmas eve but not on New Year’s eve.
Meanwhile, Italy’s daily death toll is still close to 500 and the government is considering a further tightening of measures over Christmas. This means the country could go into a lockdown again.
This adds to the troubled demand outlook after both the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) revised down their estimates for oil demand for 2020 and 2021.
The Paris-based IEA noted that this year, oil demand will further drop by 50,000 barrels per day and for next year by 170,000 barrels per day, citing reduced jet fuel use as fewer people travel by air.
OPEC, on its part, expects global oil demand to fall by 9.77 million barrels per day in 2020 to reach 89.99 million barrels per day while expectations for 2021 were lowered to 95.89 million barrels per day from 96.26 million barrels per day.
OPEC has agreed to lift production by 500,000 barrels per day next year and will re-evaluate where the market is to determine the next month’s quota. OPEC will hold their next meeting on January 4.