The global oil market has witnessed a significant decline, with Brent, the global benchmark, dropping to $100 per barrel. This represents a 3.4% decline, marking the fourth consecutive session of losses. The October West Texas Intermediate contract also fell by about 4.5%. The decline in oil prices may bring relief to Nigeria, where petrol prices have reached record highs, exacerbating the country's cost-of-living crisis.
The recent decline in oil prices is attributed to signs of increased oil exports from Saudi Arabia via the Strait of Hormuz. Satellite data revealed that Saudi Arabia's observed oil loadings from inside the Persian Gulf surged over the weekend, with the highest number of ships seen at the nation's main Gulf port since June. This development indicates that the kingdom is successfully redirecting exports back toward the Gulf after the shutdown of its East-West pipeline due to drone attacks.
The ongoing conflict in the Middle East has led to increased attacks on energy infrastructure. Ukraine has been targeting Russian refineries, raising concerns over the time needed for repairs and a full return to normal operations. Meanwhile, Saudi Arabia issued air-raid alerts for Riyadh and warnings in Red Sea hubs, including Yanbu, amid continued Houthi attacks. These developments have contributed to the volatility in the global oil market.
Diplomatic efforts may also play a role in easing tensions in the Middle East. US President Donald Trump expressed openness to meeting Iranian President Masoud Pezeshkian on the sidelines of the UN General Assembly in New York. This potential diplomatic progress has added to hopes for a resolution to the Iran conflict, which could further ease oil price pressures.
The decline in oil prices may bring relief to Nigeria, where petrol prices have reached record highs. Petrol prices have risen to about 1,400 naira ($1.05) per liter in Lagos and Abuja this month, up from roughly 1,200 naira a month earlier. The surge in petrol prices has piled fresh cost-of-living pressure on President Bola Tinubu's government ahead of elections in less than six months.
Despite the operation of the Dangote refinery at full capacity of 700,000 barrels per day, Nigeria has been unable to shield consumers from international oil market shocks. The refinery's operation has highlighted the limits of domestic refining in mitigating the impact of global oil price fluctuations. The National Oil Corporation of Libya also reported that the country's largest oil field had reduced output after a pipeline was shut by an "armed group."
Analysts believe that the worst pressure on crude may be easing. Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management, noted that focus has shifted to improving oil and LNG flows through Hormuz and the possibility of diplomatic progress on the sidelines of the UN General Assembly in New York. However, supply risks remain in the Middle East, and the situation will continue to be closely monitored.
Key points
- Oil prices have dropped near $100 per barrel, marking a potential decline in petrol prices in Nigeria.
- Increased oil exports from Saudi Arabia via the Strait of Hormuz have contributed to the decline in oil prices.
- Diplomatic efforts may ease tensions in the Middle East, further easing oil price pressures.
