Oil price on Monday dipped below $30 per barrel, the lowest in four years.
It is a fallout of the global price war between Saudi Arabia and Russia caused by the coronavirus pandemic.
Price of global benchmark grade, Brent crude, fell by 10 per cent to $30.49 a barrel, shedding about $4 from Friday’s over $34 per barrel.
The West Texas Intermediate (WTI) dropped by 8.13 per cent to $29.15 per barrel from $33 per barrel at the weekend.
The demand shock caused by the coronavirus pandemic was worsened by the disagreement between Russia and Saudi Arabia on production cut at the OPEC + meeting in Vienna, Austria on March 6.
The disagreement crashed the earlier deal between OPEC and non-OPEC group on production reduction to stem undue oil price fall.
OPEC and non-OPEC allies are free to produce as much oil as possible and sell at any price, which can be as low as $20 per barrel.
Saudi Arabia’s national oil company, Aramco, said it would be supplying 13 million barrels per day from April while Russia said it could also increase its output to 12 million barrel daily.
According to Bloomberg, demand for jet fuel, gasoline, and diesel has slumped amid the pandemic as airlines cancel flights, cruise lines shut operations, and consumers are told to practise social distancing.
The global price war has threatened to push supply to never-before-seen levels, according to IHS Markit.
If the price war between Russia and Saudi Arabia continues while the world slips into a recession, the oil glut could grow to 800 million to 1.3 billion barrels in the first six months of this year, IHS said in a note.
The US oil industry could be one of the hardest hit by the glut, the note said; output in the US could drop by 2 million to 4 million barrels per day for the next year and a half.
That could lead highly indebted US shale companies to default, according to JPMorgan.
Nigeria, Africa’s largest producer, is also working around its production cost to remain afloat – the country having one of the highest oil production cost per barrel in the world at about $23 per barrel.
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, said the Corporation is putting measures in place to reduce the cost of crude oil production in Nigeria.
Kyari, at the Central Bank of Nigeria Round Table discussion in Abuja, stated that at the moment the cost of crude oil production in the country was between $15 and $17 per barrel, but noted that countries such as Saudi Arabia produces at between $4 and $5 per barrel.
He stated that due to the coronavirus pandemic, Nigeria’s 50 cargoes of crude oil have not found landing, adding that this implies that there are no off-takers for them for now due to drop in demand.

By Emeka Ugwuanyi