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Coronavirus: Low Crude Oil Prices May Force Nigeria to Abandon Production

Nigeria may soon slip out of reckoning as a profitable oil producer in the Organisation of Petroleum Exporting Countries (OPEC) if crude oil prices decline further by at least another $3.

On Monday, the ravaging impact of the deadly coronavirus pandemic worsened, driving crude oil prices at the international oil market closer to the tipping production curve.

Brent crude for May delivery lost $1.16 to sell at $25.82 per barrel on the ICE Futures Europe Exchange after dropping to as low as $24.68 last Friday, the lowest since May 2003.

A fortnight ago, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, said at a crude oil price of $22 per barrel, high-cost oil producers like Nigeria should count themselves out of the business.

“Saudi Arabia and Iraq can afford to crash their prices by $8 and $5 respectively in response to the (coronavirus) crisis, because their production cost is low, unlike Nigeria which belongs to the group whose production processes involve about $15- $17 cost per barrel.

“So, when country’s crude oil is selling for $30 per barrel, and circumstances are forcing the country to drop the price by $8, it means in the market the country will be selling for $22 per barrel. That’s a massive problem.

“When crude oil price has gone down to $32 per barrel and you are producing at $30, you don’t need a soothsayer to tell you, you are out of business already,” Mr Kyari said.

The NNPC GMD warned of tougher times ahead, amid declining crude oil prices at the international market as a result of the growing negative impact of the dreaded coronavirus pandemic on the world economy as well as the oil war between Saudi Arabia and Russia.

It is not clear if the NNPC will continue to produce oil since the price has dropped close to the $22 per barrel price Mr Kyari spoke about.

When PREMIUM TIMES called his telephone to seek his clarification on the issue, he did not pick his call on Monday. He did not also respond to a text message sent to him.

NNPC spokesperson, Samson Makorji, did not return the call earlier by our reporter, after promising to do so after his meeting. He also did not send a response to the text message sent to him.

Oil prices have continued to plunge downwards following Saudi Arabia’s unrelenting oil price war with Russia, with each flooding the market with cheap excess crude oil to destabilise market supply.

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Coupled with the restrictions in commodities exports as a result of the coronavirus pandemic, oil demand has continued to decline drastically, driving prices to multi-year lows in recent weeks.

The world’s largest oil trader, Vitol, had earlier said global oil demand could fall by more than 10 per cent due to lockdowns spreading across Europe in an attempt to combat the effect of the coronavirus outbreak as well as measures in the United States to boost supply.

“Global crude oil demand could easily drop by 10 million barrels per day or more,” Reuters quoted the head of research at Vitol, Giovanni Serio, as saying.

The UN Secretary-General, António Guterres, disclosed that coronavirus, which is also called COVID-19, has killed people as well as “attacked the real economy at its core, trades, supply chain, businesses, jobs, entire countries and cities are on lock-down, while borders are closing.”