Oil prices slid yesterday, falling close to their lowest level this year, as street protests against strict COVID-19 curbs in China, the world’s biggest crude importer, stoked concern over outlook for fuel demand.
Brent crude dropped by 1.6per cent, to trade at $82.31 a barrel having slumped more than three per cent to $80.61 earlier in the session for its lowest since January 4.
U.S. West Texas Intermediate (WTI) crude slid one per cent to $75.53 after touching its lowest since Dec. 22 last year at $73.60.
The slip in the price of Brent still leaves Nigeria, Africa’s largest oil producer $10 above the benchmark of $70 proposed in the revenue and expenditure budgets of 2023 which stand at N9.73 trillion and N20.51 trillion, respectively. This figure results in N10.78 trillion fiscal deficit which represents 4.78 per cent of the nation’s gross domestic product (GDP).
The proposed budget also pegged oil production at 1.69million daily and GDP growth rate at 3.75 per cent.
Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines.
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Phil Flynn, an analyst at Price Futures Group in Chicago, said oil was paring losses as investors looked ahead to an OPEC+ meeting this weekend.
“We feel some of the selling based on reports of China uprisings was overdone. Inventories are still near record lows and this probably increases the odds of an OPEC production cut,” Flynn said
China has stuck with President Xi Jinping’s zero-COVID policy even as much of the world has lifted most restrictions.
Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for a third day and spread to several cities.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on Dec. 4. In October, OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023.
Meanwhile, Group of Seven (G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets.
However, EU governments were split on the level at which to cap Russian oil prices, with the impact being potentially muted.
“Talks will continue on a price cap but it seems it won’t be as strict as first thought, to the point that it may be borderline pointless.
“The threat to Russian output from a $70 cap, for example, is minimal given it’s selling around those levels already,” senior markets analyst at OANDA, Craig Erlam, said.
The price cap is due to come into effect on Dec. 5 when an EU ban on Russian crude also takes effect.