The Brent crude, against which Nigeria’s oil is priced, gained 30 cents to trade at $66.30 per barrel as of 5.40pm Nigeria’s time.
This slight increase on the Brent came on the back of improving trade relations between the United States and China as well as rising tensions in the Middle East.
Analysts at Lagos-based Financial Derivatives Company Limited (FDC) said in its latest update, “We expect oil prices to remain above $60 per barrel, owing to the decision during the OPEC meeting to cut the supply of oil further by 500,000 barrels per day which would take effect from January 202.”
According to them, oil production is expected to decline in the coming months as the agreement on deeper production cuts kick in.
“It is unclear whether Nigeria would be included in the deeper cuts. If this happens, and Nigeria is forced to comply, the country’s oil output levels may fall towards 1.7 million bpd.
“Nigeria is more sensitive to production than price. A lower oil output would affect the actualisation of budgeted revenue projections as oil revenue accounts for 31.35 per cent of the total revenue projected.”
Protesters who were angry at the air strikes carried out by the United States against Iran-backed Katib Hezbollah over the weekend, stormed the US Embassy in Baghdad on Wednesday, although they withdrew after the United States deployed extra troops.
“We do not see a threat to Iraq’s crude supply at the moment, other than a small wind down over the first few months of 2020 in line with its OPEC cut agreements,” a consultancy, JBC Energy said.
According to JBC, heightened tensions in the region involving Iranian-backed forces may introduce a certain geopolitical risk.
Oil was also boosted by optimism that trade talks between the world’s two largest economies would support demand as the US President Donald Trump said on Tuesday that the US-China Phase 1 trade deal would be signed on January 15 at the White House.
OPEC and its partners, including Russia, agreed to cut output by a further 500,000 bpd from January 1, on top of their previous cut of 1.2 million bpd.