The international oil benchmark, Brent crude, extended its gains on Friday, rising above $55 per barrel, in what is a potential boost to Nigeria’s crude oil export revenue.
Brent crude, against which Nigeria’s oil is priced, hit an 11-month high of $55.41 per barrel as of 2:50pm Nigerian time on Friday, trading more than $15 higher than the Federal Government’s benchmark for the 2021 budget.
The 2021 budget, which was signed by the President, Major General Muhammadu Buhari (retd.), on December 31, was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.
The upturn in oil prices was supported by Saudi Arabia’s pledge to cut output and a global stocks rally as investors looked beyond rising coronavirus cases, according to Reuters.
“The surprise Saudi cut is keeping bulls at the helm. It will take a brave man to bet against the current bullish run of play,” said Stephen Brennock of oil broker PVM.
Saudi Arabia this week pledged extra, voluntary oil output cuts of one million barrels per day in February and March as part of a deal under which most OPEC+ producers will hold production steady in the face of new coronavirus lockdowns.
However, analysts said oil prices could see a correction in coming months, if their rallies were not backed by stronger fuel demand.
Severe mobility restrictions around the world to contain a surge in COVID-19 cases still weighed on fuel sales, weakening the prospect of energy demand recovery in the first half of 2021.
“Oil markets are expected to stay in a bullish tone towards February,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.