The demand for Nigeria’s oil will touch its 12-year lowest in 2015, according to forecast by the Organisation of Petroleum Exporting Countries (OPEC).
The anticipated weak demand came on a day Nigeria registered its intention to lower its economic growth forecast for 2015, as tumbling oil prices erode government revenue.
OPEC, which swiftly cut the forecast for how much crude oil it will need to provide in 2015 to the lowest in 12 years, said the same fate ahead of Nigeria would befall 11 other memberstates.
The forecast came amid surging US shale supplies and reduced estimates for global consumption.
The cartel lowered its projection for 2015 by about 300,000 barrels a day, to 28.9 million a day. That’s about 1.15 million a day less than the group’s 12 members pumped last month and the 30-million barrel target they reaffirmed at a meeting in Vienna on November 27.
Nigeria, Africa’s biggest crude exporter, depends largely on proceeds from crude to service over 70 per cent of its budget. In a monthly report, the OPEC forecast demand for the group’s oil will drop to 28.92 million barrels per day (bpd) in 2015, down 280,000 bpd from its previous expectation.
“There is a growing realisation that the first half of next year is going to look very weak,” said Gareth Lewis-Davies, strategist at BNP Paribas. “You start to price that in now.”
OPEC members are divided on how to respond to the global surplus and falling prices. The cartel may still hold an emergency meeting before its June gathering, Algeria’s energy minister had said last Tuesday.
Italian oil and energy group Eni said OPEC might cut output in the spring and that oil prices would remain between $66 and $75 per barrel next year. The impact of this year’s 40 per cent price collapse on supply and demand remains unclear, Bloomberg reported OPEC to have said.
The price of oil has touched the new lowest point in five years. The commodity sold for $65.05 per barrel before the end of transaction at the global market on Wednesday.
Brent crude oil fell to a new five-year low below $65 a barrel yesterday on mounting signs of oversupply and lacklustre demand as global economic growth falters. And that is bad news for the Nigerian economy as the Federal Government may be forced, again, to cut the oil benchmark for the 2015 budget from its extant $65 per barrel.
The government had earlier fixed $73 per barrel as oil benchmark for the 2015 budget before it reviewed it as the oil price plunged further.
Meanwhile, the government, which had initially projected 6.35 percent growth for next year, may lower that estimate by about one percentage point next week, Paul Nwabuikwu, media aide to Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo- Iweala, said yesterday.
Global oil prices have plunged more than a third since June, roiling Nigeria’s markets, eroding foreign-currency reserves, which fell to $35.95 billion by December 8, down 19.3 per cent from a year earlier.
The falling reserves had prompted policy makers to devalue the naira for the first time in three years. Nigeria’s reserves fell from $44.53 billion on December 8 last year. It stood at $37.98 billion a month ago, according to the CBN on Wednesday.
The naira had also fallen 12.1 per cent against the dollar this year, including a one-off, 8 per cent devaluation by the central bank last month, as global oil prices plunged.
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