Note to Nigerian senate: OPEC oil now $32

As the senate debates pegging the crude oil benchmark at $40, the Organisation of Petroleum Exporting Countries (OPEC) basket price of the commodity is now $32.60.

According to the OPEC secretariat calculations, “OPEC daily basket price stood at $32.60 a barrel Monday, 14 December 2015, compared with $33.76 the previous Friday”.

Udo Udoma­, the minister of budget and national planning, presented the medium term expenditure framework (MTEF), last Monday, bench-marking oil price for 2016 at $38.

A day after the presentation saw the OPEC secretariat figures revealing that the benchmark was overly optimistic, as the price of crude oil on the same day as the MTEF presentation was $36.45 in the OPEC basket.

Debating the benchmark price of crude oil, Ike Ekweremadu, deputy senate president, argued that the price be pegged at $40.

“I have looked at the projection for the oil price. The benchmark of $38 per barrel. That appears to me to be conservative. From the projection of oil price for 2016, it is estimated‎ that it will hover between $40 and $45,” he said.

“I like to suggest that the senate consider an oil benchmark of $40. I’m sure that this will help cushion the problems we have in the states.”

Adamu Aliero, a senator from Kebbi state‎, opposed Ekweremadu’s proposal, regarding it as unrealistic.

“It is unrealistic. I therefore recommend we take it to $35 per barrel,” Aliero said.

The reality in the OPEC basket, which is an average of oil price from 12 countries from around the world, suggests that neither Ekweremadu nor Aliero’s proposal is realistic for the 2016 fiscal year.

Since the senate had the debate last Wednesday, the crude oil prices have fallen drastically, with Western Canada select, trading at less than $24 and the most expensive Brent oil trading around $37.

If the MTEF benchmark is not reviewed by the national assembly, the 2016 budget would encounter difficulty in its funding.

The new OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).