Oil prices dip to six-year low, nation awaits new budget benchmark

THE price of Brent crude oil has fallen, further taking it to a new six-year low.
  The price of a barrel of the North Sea benchmark dropped by three per cent to $48.54, its lowest level since April 2009.

US crude oil was also at its lowest level since that time, down by 2.6 per cent to $47.10 a barrel.

  The price of Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crudes stood at $45.19 a barrel yesterday, compared with $45.68 the previous day.

  Meanwhile, a new oil price benchmark was as at Monday being awaited in view of the sliding profile of the commodity.

  The government, in the current budget had put the benchmark at $65 per barrel.
  The Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, was yet to be specific about the new oil price benchmark, but assured of Nigeria’s readiness to weather the storm, should the price slide further at the international market.

  Okonjo-Iweala, who spoke at the fourth Capital Market Committee (CMC) retreat organised by the Securities and Exchange Commission (SEC) in Abuja, allayed fears about the fate of the nation’s economy in some quarters, assuring that several measures were on ground to mitigate the effects of the fall on the Nigerian economy.

  Already, Goldman Sachs leading investment house drastically cut its three-month forecast for Brent crude from $80 a barrel to $42.

 Goldman Sachs said yesterday the price would stay close to $40 for most of the first half of this year, at which price the firm said investment in the US shale gas industry would be held up.

  The oil price has now fallen by more than half since June, when the price stood at $110 per barrel.

  Production from North American shale companies has increased the supply of oil and gas, helping to depress prices.

  Also undermining the price of oil are slowing global economic demand and a rising dollar against a range of other currencies.

The latter can flatter the oil price, which nonetheless can remain the same price in a local currency that buys fewer dollars.

  In another development dampening the oil price, two fires broke out over the weekend at refineries in Ohio and Pennsylvania, which will not now be able to process their normal flow of crude oil.

  The oil producing countries' cartel, OPEC, tends to respond to falling prices with a cut in output, a move that typically boosts the price.

  However, at its most recent meeting in November, the group failed to agree on price cuts, with the dominant producing country, Saudi Arabia, preferring to retain current oil output.

  There were signs over the weekend that its stance may be shifting, after fellow member Venezuela said in a statement it had agreed with Saudi Arabia to work for a recovery in the oil market and oil prices "with state policies" from the two countries.

  However, this statement gave no details as to how this would be achieved, and would mark a change in policy for the world's biggest oil producer, which ignored pleas from its fellow cartel members to reverse the slide in prices.

  Certain business sectors are expected to benefit from the situation.

  Airlines are one obvious industry. On Monday, Lufthansa said it expected its fuel bill for this year to be 13 per cent lower than previously forecast, as a result of the low oil price.