Fears of tighter global supply push oil price to $83 a barrel

Oil price, on Thursday, rose to $83 a barrel.

Brent crude, the global oil benchmark, rose 0.75 percent to trade at $83 a barrel, while the US West Texas Intermediate jumped 0.86 percent to $79. 

The development came on the back of expected tightening of supply due to production cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, as well as some involuntary outages.

The uptick in global crude prices also comes a week ahead of when key OPEC+ ministers are expected to meet on August 4 to review the oil market.

The increased price of Brent crude, Nigeria’s oil benchmark, is said to inadvertently push the international spot price of petrol — a major determinant of the commodity’s price in Nigeria in the post-subsidy regime.

Last week, when petrol price increased from N540 to N617 per litre, Farouk Ahmed, chief executive officer (CEO) of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), explained that the price hike was a result of rising crude prices.

“A week or so ago, the price of crude was hovering around $70 per barrel. Now, it’s over $80 per barrel. So, of course, the crude prices also drive the product price,” he said.

⁣“As the importers are importing, they base it on the cost of importation plus the freight plus other costs elements in terms of local distribution.”