…cost of imported fuel to soars
Nigeria is in deeper trouble, as oil prices rose to the highest level in seven weeks early on Tuesday. This is because the market continues to believe that the economic and oil demand rebound in the United States and Europe will outweigh the still tragic COVID numbers in India and Brazil.
The implication of this is that the prices of petroleum products most of which are imported into the country, especially petrol will also be high and this would be putting a lot strain s on the government revenue.
Nigeria imports almost 100 percent of its petrol needs because the refineries in the country are down.
Recently, the Federal Government approved $1.5 billion of spending on the modernisation of the Port Harcourt oil refinery and awarded a contract to Italy’s Tecnimont,
The project will be completed in three phases, the first within 18 months taking the refinery to 90% production capacity, with the second and final phases carried out within 24 months and 44 months respectively.
Nigeria has four refineries with a combined capacity of 445,000 barrels per day (bpd): one in the north at Kaduna and three in the oil-rich Niger delta region at Warri and Port Harcourt. The Port Harcourt complex consists of two plants with a combined capacity of 210,000 bpd.
In April 2020, they were all shut pending rehabilitation while the refineries lost some 167 billion Naira a year early and only Warri processed any oil.
The U.S. benchmark WTI Crude was back above $65 per barrel, having touched the highest level since March earlier in the day. WTI Crude prices were up 1.29 percent at $65.27, while the international benchmark Brent Crude was up 1.32 percent on the day at $68.40.
The oil complex was also supported on Tuesday by a weaker U.S. dollar, which fell after Monday data showed that U.S. manufacturing activity grew in April at a slower pace than expected.
The central theme in the oil market, however, was the expected economic and oil demand recovery as more U.S. states are easing restrictions toward full reopening and the European Union is proposing to welcome vaccinated tourists this summer.
Starting mid-May, New York, New Jersey, and Connecticut will remove the majority of the capacity restrictions for restaurants and offices. They also have plans to increase the limit on outdoor social gatherings in a significant easing of restrictions on the region’s businesses, venues, and gatherings “given significant progress in vaccinations and sustained reduction in COVID-19 cases and hospitalizations,” the governors of the three states said.
In Europe, the EU also gave oil bulls hope this week, unveiling on Monday a plan to open its borders to vaccinated tourists. The European Commission proposes that the EU allow entry for non-essential travel for anyone who has received the last dose of an EU-approved vaccine at least two weeks before arrival.
“Crude prices were extending Monday’s moderate gains early Tuesday in Asia under the positive momentum of a steadily improving economic picture in the US and the Eurozone,” Vanda Insights said in a daily commentary on Tuesday.