Oil prices continued an upward trend on Wednesday as confidence in the outlook continues to grow on the back of strong fuel demand in western economies.
Brent crude futures were up 42 cents, or 0.6percent, at $72.64 a barrel at the time of filling this report, having earlier touched $72.83 – highest since May 20, 2019.
U.S. West Texas Intermediate (WTI) crude futures climbed 35 cents, or 0.5percent, to $70.40 a barrel, after rising to as high as $70.62 – highest since October 17, 2018.
According to energy analyst, the widespread faith that oil demand growth will trend significantly higher in the second half of the year is paving the way forward for the price rally.
Crude oil prices had suffered a huge decline globally following the impact of the coronavirus pandemic.
The decline in oil prices affected several economies globally, particularly countries like Nigeria which depend largely on crude oil earnings.
Oil prices have, however, been on a tear on the back of gradual global recovery and vaccine roll out.
It still faces bumpy short-term demand amid concern that new virus variants will lead to more lockdowns, while vaccine rollouts are slower than expected in some countries.
Although crude oil accounts for eight percent of Nigeria’s gross domestic product (GDP), it contributes over 90 percent of Nigeria’s foreign exchange earnings.
The 2021 budget, which was signed by President Muhammadu Buhari on December 31, 2020, was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.
The resurgence in the price of crude oil bodes well for the Nigerian economy, as this will boost the country’s revenue needed for the implementation of the 2021 budget, improve crude oil receipts, and consequently bolster foreign exchange inflows, however, the prolonged high crude prices will ultimately feed into a climb in petrol’s landing cost, meaning an increase in fuel price.