As global oil prices inch towards $60, analysts have started weighing the real meaning to the economy that just exited recession.
Whereas some see the rise as a good time for the economic management team deepen efforts at reviving the real sector of the economy so that more wealth will be created, others caution government, saying structures must be put in place in case there is a sudden fall so that the economy will not head back to recession.
Before now, pundits had traced the exit from recession in second quarter to the steady rise in oil prices coupled with achieved normalcy in Niger Delta which encouraged rise in oil activities.
It would be recalled that oil sales make up to 90 per cent of government’s income while taxes and other receipts make up the remaining paltry percentage.
Oil prices rose on Monday over supply concerns in the Middle East and as the U.S. market showed further signs of tightening while demand in Asia keeps rising.
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Brent crude futures, the international benchmark for oil prices, were at 57.84 dollars.
U.S. West Texas Intermediate (WTI) crude futures were at 52.03 dollars per barrel..
The amount of U.S. oil rigs drilling for new production fell by seven to 736 in the week to Oct. 20, the lowest level since June, General Electric Co’s Baker Hughes energy services firm said on Friday.
Much will depend on demand to guide prices, with the U.S. market tightening, flows from Iraq reduced due to fighting between government forces and Kurdish militant groups.
Again, production is still being withheld as part of a pact between the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to tighten the market.
In the main growth areas of Asia, consumption remains strong especially in China and India, the world’s number one and three importers.
India imported a record 4.83 million barrels per day (bpd) of oil in September as several refiners resumed operations after extensive maintenance to meet rising local fuel demand.
The country’s September imports stood 4.2 per cent above this time last year and about 19 per cent more than in August, ship-tracking data from industry sources and Media Analytics showed.
Given the tightening oil market conditions, many analysts expect prices to rise further.
