Crude oil prices dropped on Wednesday morning amidst rising tension between the US and China over new national security laws enacted by China in Hong Kong.
Brent crude dropped slightly to 0.17%, trading at $36.18 by at 6 am Nigerian time. U.S’s West Texas Intermediate crude futures also lost about 0.35%, at $34.23 a barrel.
Crude oil prices have been under pressure after America’s President Trump’s economic adviser, Larry Kudlow, said the Chinese were making “a big mistake” with national security laws enacted in Hong Kong.
Nigeria’s foreign exchange reserves declined from $45 billion recorded in June 2019 to around $35.22 billion in May 2020 due to low crude oil prices. A decline in crude oil prices hurts Nigeria’s foreign earnings because Nigeria’s main source of funds is crude oil.
However, OPEC (Organization of Petroleum Exporting Countries) and major oil producers including Russia, a group also known as OPEC+, are reducing their crude oil production by 10 million barrels per day in May-June to support crude oil prices as measures to curtail relative weak demand for crude caused by COVID-19.
“Early estimates suggest gasoline demand is down by as much as 30% from last year as people stay close to home,” ANZ Research said in a note to Reuters.
“Some analysts and banks are predicting a balanced oil market as soon as June, but that could be too optimistic”, according to Eurasia Group.
There is … a significant risk of repeat outbreaks and lockdowns. Even without them, some restrictions – especially on aviation – will remain in place,” Eurasia Group added.