December 20, 2024
Global oil prices dipped on Friday, reflecting growing anxiety over demand growth prospects for the coming year.
This development could signal more economic turbulence for major import-dependent economics like Nigeria,
As reported by Nairametrics, both Brent and U.S. oil benchmarks are poised to close the week nearly 3% lower, underscoring the bearish sentiment gripping the market.
Brent crude futures slided on Friday, by 41 cents, or 0.56%, to $72.47 per barrel, in the same vein, U.S. West Texas Intermediate (WTI) crude futures fell by 39 cents, or 0.56%, settling at $68.99 per barrel.
These declines maintained a week-long trend of reduced prices, driven by mounting doubts over global economic recovery and oil demand stability.
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, recently revised their global oil demand growth forecast for 2024 downward for the fifth consecutive month.
These persistent downward adjustments reflect an uncertain global economic outlook, shaped by sluggish industrial output, inflationary pressures, and slowing consumer demand in major oil-consuming nations.
For Nigeria and other oil-importing economies, the OPEC+ forecast signals potential challenges, including higher energy costs, strained budgets, and economic uncertainty.
Although J.P. Morgan analysts has foreseen the oil market moving from a balance in 2024 to a surplus of approximately 1.2 million barrels per day (bpd) in 2025. This surplus projection stems from expectations of a significant increase in non-OPEC+ production, estimated at 1.8 million bpd, while OPEC’s output remains steady.
The predicted surplus could place downward pressure on oil prices, further straining the revenues of oil-exporting nations while providing temporary relief to importers. However, prolonged price instability could discourage investment in new production capacities and energy infrastructure.
Amid these market shifts, G7 countries are reportedly considering tightening their price cap on Russian oil exports.
READ MORE; U.S Dollar 2-Year High On Rates Cut, Dips Oil Prices.
Options on the table include imposing an outright ban or lowering the current price cap threshold, according to a Bloomberg report.
This initiative follows Russia’s ability to sidestep the $60 per barrel price cap, imposed in 2022, by utilizing a “shadow fleet” of ships.
These covert operations have enabled Moscow to sustain its oil exports despite sanctions. In response, the European Union and the United Kingdom have recently introduced new sanctions targeting Russia’s shadow fleet, aiming to close existing loopholes.
The shifting dynamics in global oil markets will present both challenges and opportunities for Nigeria as a major oil importer.
Declining oil prices could provide some relief for domestic energy costs but also signal potential revenue declines from oil exports.
Additionally, supply chain disruptions and geopolitical tensions surrounding Russian oil could exacerbate economic instability.
To navigate these challenges, policymakers in Nigeria and other vulnerable economies must prioritize strategic energy policies, diversify their revenue bases, and invest in renewable energy infrastructure.
