Last week, Brent crude hit a two-month high, with a price of $86.06 a barrel as of press time Tuesday morning.
Crude prices may climb higher due to tighter supply, according to Vitol, the world’s largest independent oil trader.
In an interview with Bloomberg, Mike Muller, Vitol Group’s president of Asia, said, “These prices are warranted.”
“Strong backwardation is well justified,” he added, alluding to a bullish trend in which short-term futures are more costly than longer-term futures.
Crude oil has already increased by 10% since the beginning of the year, with additional gains expected.
Mr. Muller went on to say that, unlike natural gas, whose high price has already caused some industrial users to reduce usage, oil has yet to reach that price level.
At an industry webinar, Mr. Muller said of the gas business, “People will abstain from buying expensive energy at some time.”
He went on to say, “The concern is at what point does it affect the oil market.”
With speculations that China may release oil from its strategic reserve next month, crude oil prices have been on a winning trend since October.
Analysts are concerned that this may halt the surge, but the market has remained upbeat.
Nigerian policymakers, in particular, are concerned about the surge in crude oil prices.
The National Assembly passed an N17.126 trillion ($38 billion) budget for 2022 in December, based on a baseline oil price of $62 per barrel. The oil price forecast was significantly higher than President Muhammadu Buhari’s proposal to the National Assembly on October 7 of $57 per barrel.
Even though oil exports account for over 80% of Nigeria’s foreign exchange earnings, the country has experienced a severe decline in revenue due to a drop in output.
As rising petroleum prices should mean increased income, Nigerians do not get the full advantages of the bullish trend since a major percentage of the cash is diverted to fuel subsidies.
According to data from the Nigerian National Petroleum Company (NNPC) Limited, subsidies increased to N1.16 trillion between January and November 2021.
Last week, Brent crude hit a two-month high, with a price of $86.06 a barrel as of press time Tuesday morning.
As of 9:28 a.m. Tuesday, WTI was trading at above $83 per barrel.
Mr. Muller speculated that the White House may opt to release additional crude oil from the strategic petroleum reserve, in addition to the 50 million barrels announced in November of last year.
“The market is requesting more,” he told Bloomberg.
