Fears arise for Nigeria’s 2024 budget as the price of Bonny Light drops to $76.19 per barrel.

Fresh concerns have arisen regarding the successful execution of Nigeria’s 2024 budget as the price of Bonny Light dipped to $76.19 per barrel in the global market. This reflects a $1.77 per barrel shortfall compared to the budget benchmark of $77.96, with an expected oil output of 1.69 million barrels per day.

Reports from Vanguard indicate a general decline in the prices of various crude oils, attributed to significant price cuts by leading exporter Saudi Arabia and an increase in the output from the Organization of the Petroleum Exporting Countries (OPEC), counteracting supply worries arising from escalating geopolitical tensions in the Middle East.

Brent crude experienced a 3.3% decrease, falling to $76.13 per barrel, and U.S. West Texas Intermediate crude futures dropped by 4%, reaching $70.87 per barrel. Reuters notes that both contracts had initially risen over 2% in the first week of 2024 due to heightened geopolitical risks in the Middle East following attacks by Yemen’s Houthis on Red Sea ships.

On Sunday, Saudi Arabia, responding to rising supply and competition, reduced the February official selling price (OSP) of its flagship Arab Light crude to Asia, marking the lowest level in 27 months. Analyst Phil Flynn from Price Futures Group expressed concerns about potential impacts on China’s demand and global demand, citing the weak start of the stock market in the new year.

A Reuters survey revealed an increase in OPEC oil output in December, driven by rises in Iraq, Angola, and Nigeria, offsetting ongoing cuts by Saudi Arabia and other OPEC+ members. This boost occurred ahead of additional OPEC+ cuts in 2024 and Angola’s departure from OPEC, both expected to reduce January output and market share.

IG analyst Tony Sycamore emphasized the bearish outlook based on fundamentals such as higher inventories and OPEC/non-OPEC production. However, he acknowledged the undeniable rise in geopolitical tensions in the Middle East, suggesting a potential limitation on downside risks. U.S. Secretary of State Antony Blinken engaged in further talks with Arab leaders on Monday, aiming to diplomatically address and contain the Gaza conflict.