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How COVID-19, oil price war impacts Nigeria
Saudi Arabia's ministry of energy says its crude output topped 12 million barrels for the first time in history on Wednesday, a day after the output cut agreement by OPEC and its allies elapsed. Oil prices shed nearly 70 per cent in the first quarter of the year and uncertainties around the coronavirus pandemic is still weighing on prices. Joining CNBC Africa to discuss how the global oil dynamics impacts Nigeria, Oyeyemi Oke, an Oil & Gas Lawyer and a Partner at A02 Law.
Fri, 03 Apr 2020 13:09:48 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The global oil market faces challenges from the COVID-19 pandemic and the Russia-Saudi Arabia oil price war, leading to a significant drop in oil prices.
- Nigeria's high oil production costs make it vulnerable to the current market conditions, with some producers facing the possibility of shutting down operations.
- Temporary cost-cutting measures and strategic planning are crucial for Nigeria to survive the crisis and potentially see a recovery in the second quarter.
The global oil market has been shaken by the recent events stemming from the COVID-19 pandemic and the oil price war between Russia and Saudi Arabia. As oil prices plummeted nearly 70% in the first quarter of the year, uncertainties continue to loom over the market. Oyeyemi Oke, an Oil & Gas Lawyer and Partner at A02 Law, shed light on how these dynamics are impacting Nigeria.
Oke highlighted two major factors driving the current oil market crisis. Firstly, the demand for oil has significantly dropped due to the impact of the coronavirus pandemic. Secondly, the price war between Russia and Saudi Arabia has led to a surplus of oil supply, further exacerbating the situation. This oversupply issue is particularly concerning for countries like Nigeria, where the production cost is estimated to be between $25 to $30 per barrel. With oil prices dipping below $30 per barrel, Nigerian producers are facing challenges and some may even have to shut down operations.
Saudi Arabia's decision to ramp up production to over 12 million barrels per day, the highest in history, has added pressure to the already fragile market. OPEC's failed agreement to cut production has left Nigeria with limited options. While ramping up production is not a feasible solution for Nigeria due to high production costs, Oke suggested that temporary cost-cutting measures could help the country weather the storm. By trimming production costs and ensuring efficiency, Nigeria may be able to navigate through the crisis.
Looking ahead to the second quarter, Oke remains cautiously optimistic. With the hope of easing lockdown measures and a potential increase in demand for energy as businesses resume operations, there may be a slight uptick in oil prices. However, much of this forecast hinges on how effectively the global community can contain the spread of the virus and stabilize the oil market.
In conclusion, the road ahead for Nigeria's oil industry appears challenging but not insurmountable. Collaboration with other oil-producing nations, strategic cost-cutting measures, and a focus on sustainability may pave the way for recovery in the long term.
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