Nigerians may be set for another Premium Motor Spirit (PMS) price increase as if the prediction by Goldman Sachs is anything to go by.
Analysts say that because of the removal of fuel subsidy, the expected increase in the crude oil price to $86 per barrel will naturally shoot up the pump price of petrol in Nigeria.
Anderson Okojie, a marketer, said the meaning of fuel subsidy removal is that petrol prices will increase or decrease if certain factors move in a certain direction.
“So with the expected increase in the prices of crude oil, the same is expected to see petroleum products rise correspondingly”.
Another set of analysts say the increase in the international price of crude oil ought not to affect the price of petrol in Nigeria since the country specifies direct sales.
That is because the supply of petrol is to be refined for the Nigerian market, and so no increase in the market should affect petrol price since refined crude is not being sold.
Joel Ogude, an exporter, said, there is a special arrangement for supply of crude oil for the refinery to be shipped to Nigeria. According to him, the major costs are freighting and landing costs among others.
Goldman Sachs has predicted that oil prices are set to rise to $86 per barrel at year-end, from $80 now, as record-high oil demand and lowered supply will lead to a large market deficit.
“We expect pretty sizable deficits in the second half with deficits of almost two million barrels per day in the third quarter as demand reaches an all-time high,” Daan Struyven, head of oil research at Goldman Sachs, told CNBC’s “Squawk Box Asia” program on Monday.
For a record high this summer, supply is shrinking. The production and export cuts from OPEC+ and the slowdown in U.S. oil production growth will also play a part in large deficits in the third quarter this year.
According to Goldman’s Struyven, “We expect U.S. crude supply growth to slow down pretty significantly to a sequential pace of just 200 barrels per day from here.”
The total rig U.S. count fell to 669 last week, according to Baker Hughes data last Friday.
So far this year, Baker Hughes has estimated a loss of more than 100 active drilling rigs. Last week’s count is also 406 fewer rigs than the rig count at the beginning of 2019, prior to the pandemic.
Also last week, oilfield services giants Halliburton and Baker Hughes both signaled softer demand for drilling on the North American market.
At the same time, there is already evidence of lower supply from OPEC+.
Russian crude oil exports have shown signs of decline for a second consecutive week and are estimated to have sunk to a six- month low in the four weeks to July 16. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month.
Saudi Arabia’s crude oil exports have also started to decline, to below 7 million barrels a day in May, for the first time in many months.
Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August.
