Nigeria’s oil futures, Brass River and Qua Iboe, experienced gains on Monday following the tragic news of a helicopter crash that claimed the lives of Iran’s President Ebrahim Raisi and the country’s Foreign Minister.
Brass River, a sweet medium light crude, rose by 0.70 percent to trade at $86.60 per barrel. Similarly, Qua Iboe, a light sweet crude, also increased by 0.70 percent to $86.60 per barrel. Qua Iboe, produced by ExxonMobil from various offshore fields and exported through the Qua Iboe Terminal, is well-regarded for its high quality and low sulfur content, making it a preferred choice among refiners.
Experts suggest that Raisi’s death could introduce volatility in the oil markets as investors evaluate the potential impact on Iran’s oil production and exports. “We expect overall market fundamentals to improve and see similar inventory draws and price action as observed last summer, with Brent oil moving $10 higher from current levels by September,” JPMorgan analysts wrote in a note.
Despite Raisi’s death, Bloomberg reports that analysts anticipate Iran’s oil policy will remain stable under the direction of Supreme Leader Ayatollah Ali Khamenei, who retains ultimate control over state affairs. Giovanni Staunovo, a commodity analyst at UBS Group AG, and Alan Gelder, vice president at Wood Mackenzie Ltd., both concur that Iran’s oil policies are unlikely to change.
Ayatollah Khamenei has assured the public that there will be no disruptions to ongoing state affairs. Early reports attribute the helicopter crash to bad weather, which complicated search and rescue operations.
Adding to market uncertainties, Saudi Arabia’s Crown Prince postponed a visit to Japan due to his father’s health issues. In Europe, the Slavyansk oil refinery in Russia’s Krasnodar region was damaged by a weekend drone attack, state-run TASS reported. Russia has seen a rise in Ukrainian attacks on its territory since it opened a new front in northeastern Ukraine’s Kharkiv region.
OPEC and its allies, collectively known as OPEC+, are scheduled to meet on June 1. Warren Patterson, head of commodities strategy at ING, noted, “The market appears increasingly numb to geopolitical developments, likely due to the large amount of spare capacity OPEC is sitting on.”
Economic Impact on Nigeria
These developments could have significant implications for Nigeria, whose economy heavily relies on oil exports. Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies, explained, “A decline in demand could translate to lower oil prices and consequently reduced government revenue. This could pressure the country’s budget and potentially lead to cuts in public services and infrastructure spending.”
The Nigerian government’s 2024 budget is based on the expectation that oil will sell above $78 per barrel, with a production target of at least 1.78 million barrels per day. Rising oil prices also raise fresh concerns about the sustainability of Nigeria’s fuel subsidy bill.
Credit: Businessday NG (Text Excluding Headliine)
