Nigerian consumers may soon experience a reduction in the prices of petrol and diesel at the pumps, as global crude oil prices have taken another downward turn.
However, petroleum product marketers caution that this potential price drop may not materialize immediately, emphasizing the need to assess the stability of the current low crude oil prices.
Market reports indicate a significant dip in crude oil prices over the weekend, falling below the $60 per barrel mark after hovering around $65 on Friday. As of Monday, the global benchmark Brent crude was trading at $59.80 per barrel, while West Texas Intermediate stood at approximately $56.71 a barrel.
Nigeria's own crude oil grades, Brass River and Qua Iboe, were priced at $64.60 per barrel. Notably, these prices are over $10 lower than the $75 per barrel benchmark proposed in the 2025 budget revenue projections, raising concerns about the budget's feasibility.
For Nigerian consumers, the slump in crude oil prices offers a glimmer of hope for cheaper fuel. The cost of refined petroleum products in Nigeria is largely determined by two key factors: the price of crude oil and the foreign exchange rate.
Speaking with The PUNCH, marketers acknowledged the potential for price reductions but stressed that an immediate drop is unlikely. Chinedu Ukadike, the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), explained that oil speculators will carefully analyze the reasons behind the price crash and evaluate its stability before making any adjustments.
"The price of petrol may come down, but it might not be soon. Oil speculators will look at the stability first and the factors that brought the price down. So, if the factors are natural, they will not look at bringing down the price. If it is an artificial factor that can definitely be ratified, they will also leave it and watch," Ukadike stated. He suggested that if the current low price trend persists for another couple of weeks, a reduction in refined petroleum product prices might be expected.
Similarly, Billy Gillis-Harry, the President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), pointed out that refineries typically purchase crude oil in advance. "Some of these things are the input values that should be able to create a low and high, but it doesn’t take just that same speed to impact the system because there’s always crude feed that has been there before, either it’s a higher price or a lower price," he explained.
Gillis-Harry added that while lower crude prices should eventually lead to lower retail prices, the process is not instantaneous. "But the projection will always be that once there is a price fluctuation, it will naturally affect the input cost, and therefore also affect the output prices that will be sold from the retail outlets. So, we should expect such a response. But it will not be as fast as Nigeria expects it to be. There are still processes that it will go through," he said.
The recent drop in crude oil prices has been linked to a decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to accelerate oil output increases. According to a Reuters report, oil prices fell by more than $1 a barrel on Monday following OPEC+'s agreement to further speed up production hikes for the second consecutive month, raising output in June by 411,000 barrels per day. This decision has fueled concerns about increased supply in a market already facing an uncertain demand outlook.
Reuters noted that this move compounded losses from the previous week, where Brent shed 8.3 per cent and WTI lost 7.5 per cent after Saudi Arabia indicated its ability to manage in a prolonged lower price environment. This supply-side pressure has overshadowed any optimism stemming from potential US-China tariff talks, according to Saxo Bank analyst Ole Hansen.
The June output increase by the eight participating members of the OPEC+ group will bring the total combined hikes for April, May, and June to 960,000 barrels per day. This represents a significant 44 per cent unwinding of the 2.2 million barrels per day of various production cuts agreed upon since 2022, as per Reuters calculations.
While the slump in crude oil prices offers potential relief for Nigerian fuel consumers, the timing of any price reduction at the pumps remains uncertain. Marketers are closely monitoring market dynamics and the stability of the lower crude prices, alongside existing inventory costs, before any significant downward adjustments are likely to be implemented.