The international oil benchmark, Brent crude, extended its decline on Monday, trading below Nigeria’s $60 per barrel budget benchmark.
Brent, against which Nigerian crude oil is priced, dipped by $2.10 to settle at $59.79 per barrel as of 7.45pm Nigerian time. It plunged to around $61 per barrel last Thursday from $65 on Wednesday.
The 2019 budget, which was signed by President Muhammadu Buhari in May, was based on oil production of 2.3 million bpd (including condensates) with an oil benchmark price of $60 per barrel.
In October 2018, Brent crude hit a record high of $86.74 per barrel, a development that spurred the Federal Executive Council to peg the price of crude oil for the budget at $60 per barrel, up from $50.5 for the 2018 budget.
But Brent plummeted in November, trading below the $60 per barrel mark, with some experts saying that the government would need to review the oil price benchmark downwards.
The oil price, however, hit $75 per barrel in April for the first time in 2019.
Last Thursday, Brent crude plunged by more than seven per cent to its lowest level in about seven weeks after the United States’ Federal Reserve dampened hopes for a string of interest rate cuts and as rising US output helped keep the market well supplied.
“The escalation in the US-China trade is another negative for the oil demand outlook, as the fallout from the spat continues to greatly impact the Asian economic region, which is key to the oil demand outlook,” John Kilduff, partner at Again Capital Management, was quoted by Reuters as saying.
Trade war worries hit global equities again on Monday, while stoking a rally in safe-haven assets including the Japanese yen, core government bonds and gold.
The US President, Donald Trump, said last week that he would impose a 10 per cent tariff on $300bn of Chinese imports starting on September 1.
He added that he could raise duties further if China’s President Xi Jinping failed to move more quickly towards a trade deal.
The announcement extended the US tariffs to nearly all imported Chinese products.
China on Friday vowed to fight back against Trump’s decision, a move that ended a month-long trade truce.