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Nigeria revenue may crash further as OPEC forecasts supply glut

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Crude oilNigeria’s revenue from crude oil sale may drop further in the first and second quarters of 2022 going by the latest projection of surplus oil supply in the period under review by the Organisation of Petroleum Exporting Countries.

Industry analysts, as well as international organisations had explained that the surplus supply of crude oil globally had often led to a drop in the commodity’s price.

Crude oil sale accounts for bulk of Nigeria’s foreign exchange earnings, but the commodity has seen repeated plunge in price lately, a development currently being heightened by the emergence of the Omicron variant of the COVID-19 virus.

Global oil data obtained from Statistica on Thursday indicated that the average price of a barrel of Brent, the crude against which Nigeria’s oil is priced, moved up from $57.77/barrel in January 2021 to $83.54 in October.

But the price of the commodity has been falling since then, witnessing further plunged after the latest discovery of the Omicron variant of COVID-19, as it dropped to $69.33 at 5.46pm on Thursday.

Reacting to the latest COVID-19 variant and how it would affect global oil supply, the Secretary-General, OPEC, Mohammad Barkindo, said it would cause a reduction in the use of crude oil products, adding that there could be surplus crude oil in the first two quarters of 2022.

He disclosed this in his remarks at the just concluded 57th Meeting of the Joint Technical Committee of the organisation, which was made available to our correspondent in Abuja on Thursday.

“It is important to note that, in addition to the new Omicron variant, COVID-19 cases continue to rise in other regions, particularly in Europe, and the subsequent restrictions and lockdowns are resulting in decreased consumption of transport fuels,” Barkindo said.

He further noted that the organisation had continued to monitor the ramifications of the announcement made last week regarding the coordinated total release of up to 70 million barrels of oil from the strategic reserves of major consuming countries.

Barkindo said, “During last week’s ECB (Economic Commission Board) Meeting and the Technical Meeting of the OPEC and non-OPEC producers of the Declaration of Cooperation, we discussed the likely implications of this development on the global oil balance, which will also be further elaborated today in our scenarios on addressing uncertainties.

“Moreover, it is worth noting that our latest projections indicate a potential global supply surplus as early as the first and second quarters of 2022.”

He stated that in addition to these pandemic-related concerns, other demand-related uncertainties include trade tensions, ongoing supply chain backlogs, potential adverse weather conditions and evolving energy policy changes.

Barkindo observed that whether it was economic or oil market volatility, energy transition or energy poverty, global stakeholders would need to work together more and more in the decades ahead to effectively address serious issues of common concern.

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