Projections by stakeholders in the sector has predicted that oil prices have been projected to rise next year. This is just as newly imposed sanctions on Iran by the US are expected to come into force early November.
According to Reuters, oil traders, Trafigura and Mercuria, have projected a possible hike in Brent petroleum prices from its recent four-year peak of $80.94 on Monday, to over $100 at the beginning of 2019.
For Nigeria, it could mean increased spending to keep the cost of a litre of petrol at N145.
JPMorgan anticipates that the oil market will lose at least 1.5 million barrels per day to the easing out of Iran by U.S trade embargoes, while Mercuria expects a further 500,000 to be knocked out.
The restrictions to Iranian trade will affect Iran’s US dollar purchases, metals trading, coal, industrial software and its auto sector. The sanctions are expected to come into motion after a 180-day “wind-down period”, ending November 4. While the US said it wants as many countries as possible to stop buying Iranian oil, many European states as well as China and India, oppose the sanctions.
In response to Trump’s trade blockades, Iran has threatened like it did before the 2015 nuclear deal, to close-off the Strait of Hormuz, a major sea-route for oil tankers. In a rare visit to Europe last month, Hassan Rouhani, Iran’s President, said Tehran could disrupt regional crude shipments and cut its cooperation with the UN nuclear watchdog; a possibility America’s military promises to thwart.
In answer to the face-off, the Organisation of Petroleum Exporting Countries (OPEC), as well as top producer Russia, has been mulling raising output to cover up the supply gaps that will be left by Iran. A source who is privy to the discussions told Reuters on Friday that OPEC and other producers have been considering raising output by 500,000 bpd.
Based on estimates by analysts in the petroleum market, the Nigerian National Petroleum Corporation (NNPC) is spending N65 on each litre of petrol purchased by Nigerians to make sure prices do not go higher than N145. Their losses will expectedly increase if market predictions become reality.