Crude oil price slipped further closer to a 17-year low on Thursday as members of the National Assembly prepared to open debate on the 2016 federal budget, amid reports the document was missing.
The Organisation of Petroleum Exporting Countries’ data on Thursday showed that basket of 13 crudes dropped to $25.69 per barrel on Wednesday, from about $25.76 the previous day.
At the close of trading on Wednesday, WTI light crude on the New York Mercantile Exchange (NYMEX) for February delivery traded at $30.80, from about $31.12 per barrels the previous day.
Equally, Brent crude contract on the Intercontinental Exchange (ICE) traded on the same day at about $30.57 per barrel, from $30.93 per barrel on Tuesday.
The current price level was last attained in 1999 when crude oil sold at about $25 per barrel after the group intervened to boost the price from a historical slump below $20 in late 1990s.
At the rate of the current price slide, analysts are already speculating that reaching that 1990s level would be in no time.
The rapid drop in crude oil price has already made nonsense of Nigeria’s 2016 budget proposal, which the federal government pegged on an oil revenue benchmark of $38 per barrel and a production estimate of about 2.2 million barrels per day.
The Managing Director, International Monetary Fund, IMF, Christine Lagarde, told the leadership of National Assembly during her recent visit to Nigeria that commodity prices would remain lower for a longer time beyond 2016.
“Over the medium term, (crude) oil prices are likely to remain much lower than the 2010-13 average of more than $100 a barrel,” Mrs. Lagarde said.
Apart from huge over-supply in global oil markets, the IMF boss drew attention to the impact of United States shale oil boom and prospects of Iraq and Iran coming back to the international crude oil market.
Before departing Abuja at the end of the visit, Mrs. Lagarde had indicated that an economic team from IMF would be coming to Nigeria to meet with Economic Team on some issues concerning some proposals in the budget.
Indications are that the first area of concern to both government and the National Assembly members would be a drastic review of the crude oil benchmark to reflect the current reality in the crude oil market.
When crude oil price tumbled out of control in the late 1990s, OPEC members got together on March 28, 2000 to adopt a price band of $22-$28 for their basket of crudes, while real oil prices only exceeded $30 per barrel in response to the Middle East conflict.
However, with OPEC showing reluctance to reach a consensus on production cuts to stabilise the market and halt the price decline, concerns are mounting around the world, particularly among developing economies, like Nigeria, dependent almost entirely on oil revenues to survive.
When crude oil price dropped to about $50 per barrel in December 2015, from a high level above $100 per barrel the previous year, analysts thought the 168th meeting of OPEC in Vienna would provide the best opportunity for a resolution to cut production.
But, at the end of the meeting members merely reviewed the oil market outlook for 2015 and the projections for 2016, and agreed to sustain the negotiation with other oil-producing countries to avoid action that would destabilise the market.
Prior to the meeting, Saudi Arabia, one of the most influential OPEC members, had made it clear that it had no plan on its agenda to reduce for any reason its production of over 9.51 million barrels per day as at May 2015.
The country is leading a section of the group, including other Gulf State oil exporters like Venezuela, that have declared that OPEC would not intervene in the crisis, by cutting production quotas, even if global crude oil price crashes below $20 per barrel.
Worried by the alarming slide in prices, the immediate past OPEC President and Nigeria’s Minister of State for Petroleum Resources, Ibe Kachikwu, during the Gulf Intelligence UAE Energy Forum at Abu Dhabi, United Arab Emirates (UAE) on Tuesday, gave hints of pressure by other members to convene an emergency meeting in March to attempt to dialogue on the way forward.
Mr. Kachikwu drew attention to a resolution during the last OPEC meeting that an extraordinary meeting of the group would become expedient to look at crude oil price if it drops to $35 per barrel level mark.
The agenda of the meeting, the minister explained, would be for members to review the current crisis in oil markets and proffer a resolution on the way forward, particularly relating to efforts to secure the cooperation of non-OPEC member countries to reduce oil exports to stabilise price.
Although most members of the group are in support of the need to intervene to curb further price decline, Mr. Kachikwu said there was yet the view that such a decision would not yield much, since OPEC accounts for only 30 to 35 per cent of global crude oil production.
He argued that since about 65 per cent of total global production was from non-OPEC countries, the impact of the decision to intervene would be insignificant without securing their support and cooperation on the issue.