Nigeria’s reserves drop $445.4m, as oil plunges to $27.74 bbl

Nigeria’s foreign reserves witnessed another $445.4million drop yesterday as the price of crude oil fell below $28.74 its lowest point for 13 years on concerns over worsening supply glut after sanctions on Iran were lifted last week.

The reserves hit an all-time low of $28.6billion this week from $29.101billion which it was as at the end of last trading year.

There have been growing apprehensions in the oil industry that the recent lifting of sanctions on Iran by Western countries which could worsen the existing oversupply problem, even as Iran is ready to increase its daily export of 1.1million barrels of crude exports by 500,000 bpd.

“The drop in price was due to the western sanctions on Iran being lifted. This means we will be seeing a bigger oil glut with Iranian crude exports coming back to the market,” said Daniel Ang, an analyst at Phillip Futures.

The United States and the European Union lifted the sanctions on Sunday after the UN’s nuclear watchdog confirmed that Iran had complied with its obligations under a landmark deal last year to curb Tehran’s programme.

A report by BBC, explained that investors fear the lifting of Western sanctions on Iran could worsen the existing oversupply problem, as price of US crude was $29.65 a barrel after hitting $28.36.

Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Agency and any additional oil would add to the one million barrels a day of over-supply that triggered more than 70per cent collapse in oil prices since the middle of 2014. Analysts say Iran already had quite a lot of oil ready to sell.

“Iran has quite a large storage of oil at the moment. They are in a position to sell that if they choose to do so and increase supply quite quickly,” said Ric Spooner, chief market analyst at CMC Markets. The drop in the price of oil has been driven by oversupply, mainly due to US shale oil flooding the market.

At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.

Historically, Opec has cut production to support prices. But led by Saudi Arabia, by far the group’s most powerful member, the group has resolutely refused to trim supply this time.

Analysts expect supply to continue to outstrip demand over the next two years, which would keep prices low.

HSBC chief executive Stuart Gulliver said that he expected the price of oil to settle at between $25 and $40 in one year’s time.

SUN