As Coronavirus (COVID-19) maintains its spread to more countries, forcing lower demand for crude oil and attendant push for production cuts to stabilise prices by the Organisation of Petroleum Exporting Countries (OPEC), the black gold’s price plunged 30 per cent in early trading last night following the failure of OPEC to strike a deal with its allies on production cuts.
The deal’s collapse sparked fears of a price war as Saudi Arabia slashed its oil prices and reportedly gets set to boost production.
Before the disagreement between OPEC and its allies, oil prices had dropped sharply this year as the coronavirus outbreak has led to softer demand for crude.
International benchmark Brent crude futures plummeted 30 per cent to $32.05 per barrel, while the United States’ West Texas Intermediate dropped 27 per cent to $30 per barrel, its lowest level since February 22, 2016.
It will be recalled that when the price of oil slumped to $27 per barrel in February 2016, it plunged Nigeria into recession.
The current sharp drop in oil price will also threaten the implementation of the 2020 budget.
Nigeria’s 2020 budget of N10.594 trillion was predicated on the daily oil production rate at 2.18 million per barrel, and benchmark price to $57 per barrel.
Unless in the unlikely event of production jumping above 3million barrels per day to offset the price drop, the country will not be able to fund its 2020 budget.
However, after the initial drop the losses were pared somewhat, with each contract trading down slightly more than 21 per cent.
While Brent recovered at $35.40 per barrel, WTI traded at $32.17 per barrel.
On Thursday, OPEC recommended additional production cuts of 1.5 million barrels per day starting in April and extending until the end of the year.
The proposal was conditional on support from non-OPEC producers, including Russia. OPEC cautioned that the deal could only be applied on a pro-rata basis with core members set to cut 1 million barrels per day and non-OPEC partners expected to cut 500,000 barrels per day.
But OPEC ally Russia rejected the additional cuts when the 14-member cartel and its allies, known as OPEC+, met on Friday.
The meeting also concluded with no directive about the production cuts that are currently in place, but set to expire at the end of the month.
On Saturday Saudi Arabia announced massive discounts to its official selling prices for April and the nation is reportedly preparing to increase its production above the 10 million barrel per day mark, according to a Reuters report.
The kingdom currently pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day.
“We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years,” Goldman Sachs said in a note to clients.
“The prognosis for the oil market is even direr than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus,” the firm added.
Goldman cut its second and third quarter Brent forecast to $30 per barrel, and said that prices could dip into the $20s.
Saudi Arabia’s price cut followed a breakdown of talks in Vienna last week.
Analysts say Saudi Arabia is encouraged by its low marginal cost of production put at US$8.98 per barrel, which is the lowest in the world, while the highest is in the United Kingdom at US$44.33.
Nigeria at $30 per barrel for deep water and $15 for onshore production, they say, would be badly hurt by a price war.
According to the analysts, Saudi Arabia’s low oil production costs derive from three advantages: abundant pools of oil close to the surface and the sea, public ownership and no taxes on production.
With this, they say, it can make money in almost any oil price environment.
With this disagreement, oil prices plunged more than 10 per cent on Friday, with WTI sliding 10.07 per cent, or $4.62, to settle at $41.28, its lowest level since August 2016.
It was WTI’s worst day since November 28, 2014.
Brent had also slid 9.4 per cent to settle at $45.27 per barrel.
Meanwhile, the cartel and its allies agreed to meet again to monitor the situation. The current production cuts will be in place until the end of March as planned, but it’s uncertain if they will extend beyond this month.
Russian Energy Minister Alexander Novak told reporters leaving the meetings in Vienna on Friday that it meant that members could now pump what they liked starting April 1.
“We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation. So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” he said.
CNBC reported that this effectively means that producers will soon have free rein over how much they pump.
Nigerian Tests Positive to Coronavirus in US
In another development, a Nigerian has tested positive to Coronavirus (COVID-19) in the United States, according to the Mayor of Washington DC, Muriel Bowser.
In Nigeria, the Nigeria Centre for Disease Control (NCDC) disclosed yesterday that 23 suspected cases of COVID-19 have so far been identified in Edo, Lagos, Ogun, and Kano states, as well as the FCT, out of which one was confirmed positive “index case,” with no death.
NCDC Director-General, Dr. Chikwe Ihekweazu, disclosed this yesterday while speaking with the News Agency of Nigeria (NAN) in Abuja, adding that as of March 7, there was no new confirmed case of COVID-19 in the country.
The Osun State government has also embarked on the screening of foreigners at mining sites as proactive and preventive measures to forestall the spread of the virus, known as COVID-19 to the state.
Announcing the Nigerian case in the US at a press briefing yesterday, Bowser said the Nigerian, who passed through the US capital city, underwent the test in Maryland and that the state had commenced contact tracing on those he met in Washington DC.
Bowser had earlier announced that a man in his 50s has tested positive for Coronavirus, marking the first presumptively confirmed case in the capital.
She said: “The man started exhibiting symptoms of COVID-19 in late February and was hospitalised Thursday.”
In a related development, President Donald Trump said he was not concerned “at all” about the outbreak getting closer to the White House after the first Washington case and an attendee of a recent political conference also tested positive to the virus.
A total of 19 people have died in the US from the virus, while the number of infections in the country has surged to 400.
NCDC Identifies 23 Suspected Cases in FCT, Four States
Meanwhile, NAN has reported that in its eighth national situation report, following the confirmation of the first case of COVID-19 disease in the country on February 27, 2020, Ihekweazu said 23 suspected cases and 219 contacts were identified, including contacts from hotel, workplace and healthcare workers.
“No new contacts have been reported in Lagos and Ogun states,” he stressed.
He said the confirmed case was clinically stable at the designated treatment facility for COVID-19 at the Infectious Disease Hospital, Yaba, Lagos.
He reiterated that a multi-sectoral national Emergency Operations Centre activated at level three, had continued to coordinate the national response activities, led by NCDC.
He noted that the field investigations were ongoing and all contacts were undergoing daily symptom monitoring.
According to him, the index patient is currently being managed at IDH, Lagos, while passenger screening is ongoing at all international airports.
He added that there was also centralised follow up of Persons of Interests initiated for persons outside Lagos and Ogun States.
“Testing of samples collected through the national influenza sentinel surveillance system as part of enhanced surveillance is ongoing.
“A draft tool for tracking and monitoring HCW infection has been developed,” he said.
Nine countries in Africa with reported cases are – Algeria, Egypt, Tunisia, Morocco, Senegal, Nigeria, South Africa, Cameroon, and Togo.
Sanwo-Olu Meets Buhari, Says Everything Done to Contain COVID-19
The Lagos State Governor, Mr. Babajide Sanwo-Olu, at the weekend in Abuja met with President Muhammadu Buhari on Coronavirus, saying all hands are on deck to contain the epidemic in the state.
Specifically, the governor said he was in the State House to provide the president with an update on COVID-19.
After the meeting, Sanwo-Olu said he also met with the president to thank him for his support, adding that the results of all tests carried out so far had been negative.
He also said more tests were still being conducted on the disease in the state.
Sanwo-Olu, who later announced the reason for his visit to Buhari on his Twitter handle, @jidesanwoolu, said he visited the president to give him information on the index case.
According to Sanwo-Olu, the condition of the Italian patient is being effectively handled by the Lagos State Ministry of Health in collaboration with the Federal Ministry of Health and the Nigeria Centre for Disease Control (NCDC).
The governor was swift to add that the state was deploying every power within its reach to put the disease under control.
Osun Takes Foreigners’ Screening Exercise to Mining Sites
In another development, the Osun State government has embarked on the screening of foreigners at mining sites as proactive and preventive measures to forestall the spread of the dreaded virus.
The exercise, which was championed by the leadership of the State Ministry of Health, was part of the government’s strategies to curtail the influx of foreigners and illegal miners into the state, who were perceived to be the source of the spread of the disease.
Addressing journalists during the campaign exercise to some of the mining sites at Ogbagba community in Ife-South Local Government Area, the Commissioner for Health, Dr. Rafiu Isamotu, said the exercise was aimed at mapping out the Chinese foreigners and other immigrants in order to ensure that the state is free from the dreaded coronavirus and other epidemic disease ravaging the world.
He added that the foreigners were thoroughly examined and none was detected to be infected with the coronavirus or any other disease.
Also speaking, the Special Adviser to the Governor on Public Health, Mr. Siji Olamiju, said the action was in furtherance of the government’s commitment to stem the tide of epidemic diseases in the state as the administration of Governor Adegboyega Oyetola was determined to promote quality healthcare delivery.
“We are here in line with our strategy to map out the Chinese foreigners, who could be source of contamination, with our people on this dreaded disease called coronavirus. Our aim is not to stigmatise them but to prevent those who might have been infected with coronavirus from spreading the virus.”
Olamiju disclosed that the exercise on the containment of coronavirus had uncovered another public health challenge caused by illegal mining, adding that the government of Oyetola will not tolerate any form of irresponsible mining capable of causing environmental degradation.
He said: “The entire community has been destroyed by acid drilling caused by illegal and irresponsible mining where heavy metals find their ways into the rivers or water that people drink which can cause serious public health challenges.
“What we have seen here is not suitable and the government under the leadership of Governor Oyetola will not tolerate environmental damage of this magnitude. The government will ensure that miners go about their business responsibly.”