Crude oil extended its gains at the weekend after closing at a six-week high with signs of strengthening demand in key markets, thereby piling more pressure on the ability of the Nigerian National Petroleum Corporation (NNPC) to contribute to the Federation Account.
However, after weeks of bearish run, crude prices have again started to pick up, portending a higher landing cost and by extension further rise in petrol subsidy payments by the NNPC.
Demand for the US Petroleum products increased to the highest in more than two months, while distillate inventories, a category that includes diesel, dropped the most since early March.
There was a chorus of bullish voices on the outlook for crude during the week, including a prediction from Goldman Sachs Group Inc. that oil demand will post a record jump over the next six months as vaccination rates accelerate. Added to that, the Organisation of Petroleum Exporting Countries (OPEC) also raised its estimates for growth this year, although the alliance warned that a worsening virus situation in India, Japan and Brazil could derail the recovery.
India, one of Nigeria’s crude oil buyers, has recently been hit hard by a second wave that has pummelled fuel consumption and stretched the health-care system beyond its limits.
NNPC has been shouldering the subsidy on the pump price of petrol which has on some occasions gulped as much as N120 billion monthly.