With US Oil prices plunging drastically to below $0 per barrel and the price war between Russia and Saudi Arabia, also the coronavirus pandemic crashing the stock market, Nigeria should brace herself up for a very serious wave of recession in the next couple of months.
Someone somewhere said “for our ladies that reject Joe the farmer and Tunde the IT guru, for the oil and gas Alhaji, it’s time to make a reverse call, because crude oil is now cheaper than a month’s NETFLIX subscription!”
Yesterday, US crude oil prices hit $-37.45 per barrel for the first time in the history of trading US crude. This is known as trading in Negative territory.
First of trading in Negative territory means that traders will have to pay customers for patronizing them. Because there is no storage space to store excess production.
Now this price does not affect the Oil and gas Industry worldwide and even in the US, where it is happening, it applies only to May futures. The contract for June and July deliveries is at $22 and $27 per barrel respectively. “Futures” means that the crude oil that is going to be sold in May would have been sold to refiners and other buyers earlier in the year for a much higher price. But in the month of May, the prices have dropped below $0, which is a huge loss to the buyers.
On how it affects Nigeria and OPEC, this goes to show how bad the deans for crude oil has gotten. 35% of the 2020 budget in Nigeria relies on crude oil sales at $57 per barrel. The plunge in US oil prices to negative territory sends warning for others to act fast before it gets this bad for them too.
Currently, Nigeria used the Brent crude oil price benchmark which is at $25, while the crude grade, Bonny Light was sold at $15 per barrel as at last week. No, crude oil isn’t valueless just yet. All of this is expected to blow over once the COVID19-induced lockdown restrictions have been lifted. What we don’t know is how long this would last.