Oil price fell on Wednesday to $72 a barrel for the first time in more than one year. Brent crude, the global oil benchmark, fell over 5% to $72.39 a barrel — first time since December 2021.
The US West Texas Intermediate also fell over 5 percent to $67.06 a barrel. According to Reuters, the price of the commodity dropped as worries about Credit Suisse shook global markets and countered expectations of a recovery in Chinese oil demand.
Credit Suisse shares slumped by 30% on Wednesday after Saudi National Bank (SNB), its largest shareholder, said it could not provide further support.
“It doesn’t matter what your risk asset is, at this point people are pulling the plug on across different instruments here,” Robert Yawger, director of energy futures at Mizuho in New York, told Reuters.
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“Nobody wants to go home with a big position on anything today… you have nowhere to hide really.”
Also speaking on the dip, Dennis Kissler, senior vice-president of trading at BOK Financial, said hedge funds were liquidating due to rising interest rates and economic uncertainty.
He said heavy pressure on the United States stocks earlier today, was adding to the fund liquidation in crude.
The current price of the commodity is now below the $75 benchmark in Nigeria’s 2023 budget. In 2020, when a similar situation occurred, Mrs. Zainab Ahmed, minister of finance, said Nigeria would lower the $57 benchmark.
“What the impact will be on that is that there will be reduced revenue to the budget and it will mean cutting the size of the budget. The quantum of the cut is what we are supposed to assess as a committee,” she had said.
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If Ahmed’s words are to be considered, it means the federal government may consider revising the country’s benchmark to fit the global oil price — if the downward trend is not reversed.
An oil and gas analyst Meristem Securities Ltd, Bolade Agboola, told newsmen yesterday in Lagos that the advantage of the global oil price remaining above Nigeria’s benchmark is that the federal government will earn more revenue to finance its budget.
By Bosco Agba