Oil prices surged to the highest level in more than two years on Tuesday, as the world’s biggest crude oil producers agreed on a gradual easing of production cuts.
Brent crude futures, an international oil benchmark which Nigeria trade, hit $71.11 a barrel, up by 2% on Tuesday, while West Texas Intermediate oil futures stood at $68.59 after the meeting.
This is the first time since April 2019 that the oil price will trade above $70 per barrel.
Rising from its virtual meeting, on Tuesday, OPEC and its oil-producing allies, known as OPEC+, agreed to continue to boost output in July, in line with the group’s April decision to return 2.1 million barrels per day to the market between May and July.
Abdulaziz bin Salman, Saudi Arabia Energy Minister, expressed optimism over a good recovery in demand in the United States and China.
The group are expected to meet again in July to discuss production policy.
Oil prices have been on a tear since late last year as coronavirus vaccines and supply curbs from OPEC and its allies spur hopes that global stockpiles will continue to slide.
It, however, still faces bumpy short-term demand amid concern that new virus variants will lead to more lockdowns, while vaccine rollouts are slower than expected in some countries.
The resurgence in the price of crude oil bodes well for the Nigerian economy, as this will boost the country’s revenue needed for the implementation of the 2021 budget, improve crude oil receipts, and consequently bolster foreign exchange inflows.
However, the prolonged high crude prices will ultimately feed into a climb in petrol’s landing cost — meaning an increase in fuel price.