Analysts advise Nigeria, others to brace up for possible oil crash

Analysts say recent developments in the global oil market have indicated that there may be a repeat of the great oil price burst of 2014 when Brent dropped significantly from $115 per barrel to as low as $35 in 2016.

Lately, there has been fierce tussle among the big players in the global oil industry which include the OPEC, OPEC+ and the U.S President Donald Trump.

President Donald Trump’s decision to let Iran waivers expire could completely kill off OPEC alliance, unleashing serious blow on the Cartel’s ability to coordinate production cut, which analyst suggest may drive the price as low as $40.

Earlier, Russia’s finance minister Anton Siluanov, reportedly disclosed that Russia and OPEC might decide to increase production to fight for market share with the U.S. This, according to him, would drive prices down and impact the U.S negatively.

Similarly, it has been disclosed that Saudi Arabia and Iraq are prepared to reverse oil production cuts against the backdrop of Trump’s Iran sanction. Saudi is seen as going too far to work with the American Government, and the rest of OPEC+ may abandon the deal. According to Oliver Jakob, head of PetroMatrix GmbH:

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“Saudi Arabia is now in a difficult position of having an alliance with russia to reduce oil supplies and having an alliance with the u.s. to increase supplies.  You can’t have it both ways for too long.”

These developments suggest that oil production cut by OPEC and its allies (OPEC+) is just about to collapse; if report indicating Iran’s move to negotiate with the U.S to reverse the sanction is anything to believe.

Against this backdrop, planning the 2019 budget around $60 a barrel of oil is an interesting speculation to observe. Like Saudi Arabia, Nigeria cannot undermine full fledge diversification from oil. Otherwise, the economy is likely to plunge into recurring revenue crunch as oil price burst looms.

Since the formation of OPEC, oil prices have crashed three times. The first crash occurred in the mid-1980s, just ten years after its formation. Also, the second crash came at the onset of the Great Recession in 2008 below $40 a barrel. The last one occurred in 2014-2016 when oil prices decline to an all-time low average of $35 a barrel.

It is instructive to note that in 2015, the U.S. reportedly surprised the global economy by increasing Oil supply in 2014 despite the crash in oil price. This suggests that the U.S is a strong anti-oil price increase.