Emmanuel Addeh in Abuja
Oil prices surged yesterday with Brent crude hitting over $107 per barrel for the first time since May, as traders braced for a more prolonged supply shock caused by the Iran war.
Oil prices have climbed back above the $100 per barrel mark this week as fighting in the Strait of Hormuz and Red Sea has intensified. The US and Iran have traded strikes, while the Iran-backed Houthis have attacked Saudi Arabia and ignited tensions in the Bab al-Mandab Strait.
In Nigeria, fuel prices have continued to rise, with the cost of diesel (Automotive Gas Oil) reaching about N2,000 per litre in some locations, while petrol has climbed beyond N1,400 per litre in parts of the country.
The fresh increases are adding to pressure on businesses and households, particularly manufacturers, transport operators and other users that depend heavily on petroleum products for power and mobility.
The development has also raised concerns over a renewed increase in transportation and production costs, with businesses likely to pass higher energy expenses on to consumers through increased prices of goods and services.
The latest surge in pump prices comes despite increased domestic refining capacity, underscoring the continued impact of crude supply, distribution costs, market conditions and other factors on the pricing of petroleum products.
Yesterday, Brent crude, the global oil benchmark, rose 6.1 per cent and traded at $107.40 per barrel while US crude rose 6.2 per cent and hit $102 per barrel for the first time since May.
Resurgent conflict has stoked concerns of further disruptions to global oil supplies and the flow of crude through the Strait of Hormuz.
“The step up in attacks in the Strait of Hormuz and by the Houthis against Saudi Arabia suggests that Iran and its proxies are trying to regain the initiative in the war,” Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said in a note.
“This could set back the recovery in oil output in the Gulf and raises the risk that global energy prices rise even further in the coming weeks,” Tuvey said.
For the first time since the war started, S&P Global Energy said Thursday it does not expect Middle East oil production to return to pre-war levels by the end of next year. The firm no longer assumes a definitive end to the war nor a return to normal in the Strait of Hormuz by the end of 2027.
S&P now expects oil prices to stay high in the $80 to $100 a barrel range through next year.
The rise in oil prices has added to nerves about inflation and central bank rate hikes, sending ripples through bonds and stocks, a CNN report stated.