2016 Budget may suffer setback, as IMF predicts lower oil price

Palpable anxiety has continued to dominate the Nigerian economic scene, as the International Monetary Fund, IMF, yesterday predicted a further dip in the price of oil in the international market.

It predicted that the price of the product would plummet to between $20 to $30 dollars per barrel in 2016, raising serious fears on President Muhammadu Buhari’s 2016 oil benchmark and speculations that his government would bring the fuel pump price to N85 per litre from the present N87 per litre, amid calls for total removal of oil subsidy.
IMF’s prediction is premised on the return of Iran to oil export in the global market, explaining that Iranian pumps would increase the supply in the market and subsequently dip the price next year.
IMF said, during Asian trade on Wednesday, West Texas Intermediate, WTI was up 1 percent at $36.50 per barrel, while Brent Crude rose 1.27 percent at $36.57 per barrel. A further decline of $5-15 may imply that it will go further down in the $20-30 per barrel range.
Iran, a major member of the Organization of Petroleum Exporting Countries, OPE, has the ability to ramp up production, and flood the already-oversupplied markets. According to International Energy Agency, IEA’s December oil report, Iranian crude exports could push the global inventories above 300 million barrels by next year.
The country was under sanctions from the US and other western powers since 2011, which made it unable to export oil, despite having the world’s fourth-largest oil reserves. In 2016, it is expected to pump an additional half million barrels of oil per day into the markets.
According to the IMF, oil prices will decrease more, once the country’s oil production increases. Following the news about the said sanctions’ removal earlier this summer, oil prices declined.

Check the Nigerian Pilot newspaper for the full story.