Global oil benchmark, Brent crude, hit a 28-month high on Monday as Saudi Arabia’s crown prince cemented his power over the weekend with an anti-corruption crackdown.
Brent, against which Nigeria’s crude oil is priced, rose by $2 to $64.07 per barrel as of 8:03pm Nigerian time, more than $19 higher than the country’s oil price benchmark of $44.5 per barrel for this year’s budget.
The Excess Crude Account, into which the country saves the difference between the market price of oil and the budget benchmark to provide a cushion when oil prices fall or extra cash is needed for spending on infrastructure, has suffered declines since oil price slumped in 2014.
The account, which stood at about $4.11bn in October 2014, dropped to about $3.11bn in November and $2.45bn in December that year, and declined further into 2015.
The balance in the ECA stood at $2.309bn as of September 27, 2017, according to the Ministry of Finance, while the nation’s external reserves rose to $33.93bn as of November 3, 2017, latest data from the Central Bank of Nigeria showed on Monday.
“The price rise is a reaction to the uncertainty from Saudi Arabia,” the Chief Executive Officer, Sun Global Investments, Mihir Kapadi, told The Guardian.
Other factors have edged the oil price upwards. Saudi Arabia, Russia, Kazakhstan and Uzbekistan met over the weekend and said they were willing to maintain restrictions on oil production, to address a glut in supply and prop up prices.
The United Arab Emirates and Iraq have also said they would back an extension to production curbs, which were due to end in March 2018.
Meanwhile, Nigeria has expressed support for an extension of a deal between the Organisation of Petroleum Exporting Countries, Russia and other non-members to cut oil supply until the end of 2018 “as long as the right terms are on the table” regarding its own participation.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said there was growing agreement among other members of OPEC to extend the deal.
“There isn’t any reason to change what is a winning formula,” he told Reuters, adding, “There is a consensus to extend. The issue will be the duration.”
Nigeria itself, however, is exempt from the deal.
OPEC, along with Russia and nine other producers agreed to cut oil output by about 1.8 million barrels per day until March 2018 in an attempt to ease a global excess that weighed on prices.