By Dipo Olowookere
On Tuesday, the Brent crude oil extended its rally as Saudi Arabia and Russia ruled out immediate production increases, after the United States’ call for increase in supplies by the top producers.
The commodity traded late on Tuesday at $81.80 per barrel at the global market after 17 cents or 0.21 percent, data obtained by Business Post showed.
The price of the Brent is projected to continue to rise at the market as the sanctions imposed by the US on Iranian crude exports take effect from November 4, 2018.
With the Nigerian government pegging its oil benchmark at $51 per barrel in the 2018 budget, the continue hike in the commodity is a welcome development.
Yesterday, the Central Bank of Nigeria (CBN) advised government to take advantage of the rising oil prices to save for the raining days.
It warned that if care was not taken, the country’s economy may witness another recession, which it fell into in 2016 and exited a year later.
Since going out of recession in the second quarter of last year, Nigeria’s economy, the largest in Africa, has struggled.
In the second quarter of this year, the Gross Domestic Product (GDP) slowed to 1.50 percent from 1.95 percent, giving analysts something to worry about. The contraction was caused by drop in the price of crude oil during the period under review.
At the international market, crude oil prices are expected to stay under pressure on the back of a deadlock on supply between the top producers and the world’s largest economy, the United States.
President Donald Trump had asked members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia increase their supplies to make up for the expected fall in Iranian exports, but they are adamant.
“Brent oil prices are set to rise further from current levels on supply disruption after Iran sanctions and a broader range of $80 to $90 per barrel looks achievable in the last quarter of this year,” said Abhishek Bansal, founder and chairman of ABans Group of Companies.
The OPEC has 15 member countries including Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, the UAE and Nigeria. At the start of 2017, OPEC members and Russia, a non-OPEC supplier, together agreed to curtail output in an oversupplied market.
According to CARE Ratings, after the sanctions on Iran exports come into effect, oil prices “are likely to go even higher given an expected drop in supply from major producers Iran and Venezuela and political and price escalation prevailing in the markets.”
“Now, as the deadline of sanctions on Iran is nearing and as the OPEC and non OPEC countries have consistently shown their reluctance over increasing production, the latest phase of bull rally has become more and more impulsive,” said Gaurav Katariya, research head (commodity), Arihant Capital Markets. “$82 may be a short lived resistance as the rally is very impulsive and any correction of, say, 3 to 4 percent, from here will only bring in strong buying.”
Adedapo Adesanya 
Modupe Gbadeyanka