Nigeria’s top-grade Bonny Light crude traded at $68.8 per barrel on Tuesday, marking a notable decline amid rising geopolitical tensions between the US and Iran. Analysts say this price drop reflects concerns over potential supply disruptions in the Strait of Hormuz, a key chokepoint for global oil shipments. Traders have been closely monitoring Washington’s recent guidance for vessels navigating the region, which advises avoiding Iranian waters and politely declining boarding requests.
The Strait of Hormuz accounts for roughly 5% of global oil consumption, with Iran and other OPEC members, including Saudi Arabia and the UAE, exporting significant volumes through the passage to Asian markets. Any escalation in the region could threaten global supply, putting pressure on prices. Meanwhile, Brent crude fell 18 cents to $68.85, and US West Texas Intermediate dropped to $64.15 in the same trading session.
Reduced oil output from Nigeria and Libya contributed to OPEC’s overall decline in January, with Nigerian production showing the largest drop among members. Exports fell approximately 14% due to weaker loadings, despite prices hovering near $70 per barrel. President Bola Tinubu has reaffirmed Nigeria’s goal of reaching 3 million barrels per day by 2030, with interim targets of 2.5 million barrels per day by 2027. New projects totaling $18.2 billion, including Shell’s Bonga South West, aim to boost production and expand refinery capacity.
Despite ambitious projects, local oil producers face rising production costs, about 40% higher than comparable regions, which could affect Nigeria’s competitiveness in global markets. Initiatives like refinery reopenings, gas monetization reforms, and strategic investments are part of government efforts to mitigate these challenges and stabilize supply in the long term.
Global oil markets remain jittery as the EU implements stricter sanctions on Russian oil exports, targeting key ports and refineries. These measures could further tighten global supply, potentially influencing prices in Nigeria and beyond. Traders are watching closely, expecting potential price rallies above $70 if tensions escalate or declines below $61 if supply concerns ease. With geopolitical uncertainty at the forefront, Nigeria’s oil sector faces both opportunities and risks in the coming months.
source: nairametrics