Oil Hits $90 for the First Time in 8 Years, as Nigeria Says Subsidy Talks Not Quite Over

Oil Hits $90 for the First Time in 8 Years, as Nigeria Says Subsidy Talks Not Quite Over

  • The price of oil has hit an eighth month high of $90 since 2014 on Wednesday, January 26, 2022 amid international tension between Russia and Ukraine
  • The US standard settled at 2.04 per cent, reaching 90.47 per barrel for the first time in 8 years since 2014
  • Nigerian government suspended its plans to remove oil subsidy following a public outcry which was largely hinged on inflation

The price of Brent crude topped the $90 benchmark on Wednesday, January 26, 2022, for the first time since 2014 as it makes a blistering comeback.

The cusp breakthrough comes as geopolitical tension between Russia and Ukraine as well as supply remains very tight in the midst of a comeback demand.

Oil price surge to an 8th month high
Oil price surge to an 8th month high Credit: Maskot
Source: Getty Images

Oil added more than 2 per cent at one point to reach $90.47 per barrel for the first time since 2014. It pulled back briefly in the afternoon, settling at 2 per cent higher at $89.96 per barrel.

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Huge leap in 8 years

The US oil benchmark settled at 2.04 per cent higher at 87.35 per cent per barrel. During the period, the contract will hit a high of $87.05 as price last seen in October 2014.

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Goldman Sachs said Wednesday, January 26, 2022, that the firm’s base case is that supply disruptions are unlikely to happen, but that there could be an upside for energy prices given an already tight market.

Barclays had noted that while prices may be reacting in part to a “geopolitical compensation,” the underlying fundamentals are fueling the push higher.

OPEC and its oil-producing partners shave been sending back crude to the market, but the group has been unable to shore up production to hit its targets. Meanwhile, U.S. shale oil growth has slowed, and omicron hasn’t been the demand hit that was initially expected. Additionally, inventory levels remain depleted.

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Nigeria backtracks on subsidy removal

The Nigerian government this week suspended its plans to remove petrol subsidies following public outcry that such action would lead to hyperinflation in a country already battling double-digit inflation.

The government said it is shelving the for the next 18 months pending when consultation with stakeholders would have completed,

The subsidy topic has been a thorny topic in the Nigerian energy market with successive governments saying funding subsidy for petrol depletes government’s resources as it seeks more revenue to fund bloated civil service and a debilitating international debt profile.

International forecast coming true?

Meanwhile, Legit.ng has reported that investment banking company, Goldman Sachs has said the price of oil may hit $100 (N41,500) per barrel this year and may continue to rise.

The CNN reported that the bank, on a Monday evening, reports to clients, the bank back up strong calls and cited strong fundamentals in the oil industry, shocking large supply shortage and declining firepower from the Organisation of Exporting Countries (OPEC) and its partners.

By August, Goldman anticipates oil stocks in big economies to sink to their lowest level since 2000.

Source: Legit.ng

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