Oil prices slumped further to $30, its lowest in four years. Price of the Brent crude dropped by 10% to $30.49 per barrel, about $4 less than its price over the weekend.
This slump in prices is a fallout of the ongoing price war between Saudi Arabia and Russia. The West Texas Intermediate (WTI) dropped by 8.13% to $29.15 per barrel from $33 per barrel at the weekend.
The drop in demand, occasioned by the Coronavirus outbreak and subsequent spread, was further worsened by the disagreement between OPEC and non-OPEC group on production reduction to stem undue oil price fall.
Russia and Saudi Arabia took an opposing stand at the meeting on March 6 in Vienna, refusing to cut down production in line with the earlier deal. The result of this showdown is that oil-producing countries can now produce as much oil as possible, and sell at their desired price.
Speaking at the CBN consultative roundtable forum, NNPC GMD, Abba Kyari had commented on how this could mean a disaster for Nigeria competing with countries which have low costs of production. At $23 per barrel, Nigeria has one of the highest oil production cost in the world.
Saudi Arabia’s national oil company, Aramco, has declared its intention to increase to 13 million barrels per day from April while Russia said it could also increase its output to 12 million barrel daily.
With cost production of $5 or less, the countries could afford to sell their crude at rock bottom prices, leaving countries like Nigeria to grapple with the after-effects while struggling to beat down production cost.
A report showed that demand for petroleum products like jet fuel, gasoline, and diesel had slumped amid the airlines cancelled flights and shutdown of cruise lines operations.
If the price war between Russia and Saudi Arabia continues while the world slips into a recession, the oil glut could grow to 800 million to 1.3 billion barrels in the first six months of this year, IHS said in a note.