By Jeph Ajobaju, Chief Copy Editor
Oil began 2021 trading on Monday with a higher price tag as Brent crude notched 0.69 per cent to trade at $51.80 per barrel (pb) and West Texas Intermediate (WTI) 0.68 per cent to fetch $48.85 pb.
The gains built on a late December rally that closed the books on 2020 with Brent climbing 0.5 per cent to $51.09 pb and WTI 0.5 per cent to $47.85 pb after earlier losses due to global travel restrictions triggered by the coronavirus pandemic.
Addition price impetus is likely to be the OPEC+ meeting today where ministers will decide on production quotas for February.
Stephen Innes, Chief Global Market Strategist at Axi, told Nairametrics that the prevailing market sentiments supporting oil prices for the near term.
He said: “Following broader market sentiment out of the gates, oil prices have risen. Still, gains could be limited as politicians get handcuffed into tighter mobility restrictions as countries worldwide look to re-impose lockdown.
“And with contagious mutations now ravaging the EU, several major oil-consuming countries are expected to extend current lockdowns.
“Members of the OPEC group of oil producers and their partners will meet via videoconference on Monday to decide on production levels for February.
“Although prices have been stabilising higher due to the vaccine optimism, the market has not turned the corner just yet on Covid-19 uncertainty to warrant anything other than OPEC drip-feeding barrels back to the needs monthly.”
Global demand will be higher than supply – and therefore raise prices – only if OPEC remains united to limit downside risks, as disruptions due to the new coronavirus mutations are more likely to be negative than positive for short term prices.
Nigeria faces problem of smuggling
In the case of Nigeria, which depends more than 90 per cent on oil receipts for hard currency, there is an additional problem of smuggling of petroleum products which may thrive again after the re-opening of land borders on December 16.
Oil marketers have advised Abuja to strictly monitor petroleum products distribution to curb smuggling now that the borders are reopened after they were closed for 16 months.
Dateline Energy Services Chief Executive Officer, Wilson Opuwei, told the News Agency of Nigeria (NAN) that “it is a step in the right direction but there is the need to do some sort of close monitoring of what goes around in those places.
“There should be close monitoring of the movement of goods and even humans. Also, the government needs to monitor the supply and distribution of Petroleum products from end to end.
“So the reopening of the borders is a good thing because it will encourage trade between Nigeria and neighbouring countries but government needs to be proactive in ensuring that proper monitoring mechanisms are put in place.”
Major Oil Marketers Association of Nigeria (MOMAN) Chairman, Tunji Oyebanji, warned that the reopening of the borders may lead to a resurgence of smuggling unless the security agencies intensify surveillance.
In his view, smuggling is driven by the price disparity between Nigeria and its neighbouring countries, and “until we fix that, the attraction for smuggling will always be there.
“If we keep prevaricating between allowing market forces to determine price and then announcing price reductions, I don’t think we will see the end of smuggling.
“What I know is as long as you have an artificially low price in Nigeria, there will be an attraction to smuggle products to neighbouring countries. Of course open borders are likely to facilitate the process.”