Global oil benchmarks, Brent and WTI, experienced a sharp decline to four-year lows, driven by escalating US-China trade tensions and rising supply concerns. Brent crude fell to $60.44 per barrel, and WTI to $57.12, reflecting .a five-day consecutive drop. The narrowing Brent six-month spread, reaching its lowest point since November 2024 at $0.79, signals a growing market perception of oversupply.
The imposition of increased US tariffs on Chinese imports, coupled with China’s retaliatory measures, fueled fears of a prolonged trade war, dampening global economic growth and, consequently, oil demand. Analysts, like those at Rystad Energy, warn that Chinese oil demand growth, previously projected at 50,000-100,000 bpd, faces significant curtailment. OPEC+’s decision to increase production by 411,000 bpd in May further exacerbated supply-side pressures. Goldman Sachs forecasts Brent to fall to $62 by the end of 2025 and $55 by the end of 2026.
For Nigeria, heavily reliant on oil revenues (80% of government revenue, 95% of foreign exchange), this price downturn poses a substantial economic risk. The current oil prices are significantly below Nigeria’s 2025 budget benchmark of $75 per barrel, potentially leading to increased budget deficits, higher borrowing, and pressure on the foreign exchange market. The surplus outlook and narrow Brent spread could also deter upstream investment, particularly in high-cost deepwater projects.
However, a slight counterpoint emerged from the American Petroleum Institute’s report, revealing an unexpected 1.1 million barrel drawdown in US crude inventories, suggesting some resilience in demand.
Leave a comment