Due to Crude Decline, Significant Price Reductions for Gasoline and Diesel Anticipated

By Sandra Ofor

Refined petroleum product marketers warn that gasoline and diesel prices could fall as crude oil prices fall once more, but they said the drop might not happen right away because of the stability of the new low prices. 

Crude prices reportedly fell below $60 per barrel over the weekend, hovering around $65 as of Friday. On Monday, however, the benchmark Brent was trading at $59.80 per barrel, while the West Texas Intermediate was trading around $56.71 per barrel, according to oilprice.com.

Nigeria’s Brass River and Qua Iboe stood at $64.60 per barrel. The prices were over $10 below the proposed $75 in the 2025 budget revenue projection. This has also triggered fears about the feasibility of the 2025 budget.

Crude oil prices and the foreign exchange rate are the main factors that determine the price of refined products, so Nigerians are hoping that the decline in crude prices will result in cheaper fuel at the pumps. 

According to Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, oil speculators will examine the reason behind the price collapse and its stability.

“The price of petrol may come down, but it might not be soon. Oil speculators will look at the stability first and the factors that brought the price down. So, if the factors are natural, they will not look at bringing down the price. If it is an artificial factor that can definitely be ratified, they will also leave it and watch.

“So, I think for now, to enjoy stability, they will look at it and leave it this way. Maybe by the next two weeks, if it continues like this, there will be a reduction in refined petroleum products,” Ukadike stated.

According to Billy Gillis-Harry, President of the Petroleum Products Retail Outlet Owners Association of Nigeria, several refineries had purchased crude prior to the decline in prices. 

“Some of these things are the input values that should be able to create a low and high, but it doesn’t take just that same speed to impact the system because there’s always crude feed that has been there before, either it’s a higher price or a lower price.

“But if it’s a lower price, sometimes it’s easy to think it’s better to increase the price now so that you can have money to buy more crude. But the projection will always be that once there is a price fluctuation, it will naturally affect the input cost, and therefore also affect the output prices that will be sold from the retail outlets. So, we should expect such a response.

“But it will not be as fast as Nigeria expects it to be. There are still processes that it will go through,” Gillis-Harry stated.

Reuters reports that oil prices dropped more than $1 a barrel on Monday as a result of OPEC+'s decision to speed up its output increases, raising concerns about additional supply entering a market where demand is uncertain. 

Monday's opening prices for the contracts were the lowest since April 9.

Reuters said those moves compounded losses after Brent shed 8.3 per cent and WTI lost 7.5 per cent last week on rising supply concerns after Saudi Arabia signaled it could cope with a prolonged lower price environment.

According to analyst Ole Hansen of Saxo Bank, that dampened demand-side optimism that US-China tariff negotiations might take place.

 On Saturday, OPEC+ decided to accelerate oil production increases for a second consecutive month, increasing output by 411,000 barrels per day in June.

 The June increase by eight participants in the OPEC+ group, which includes non-OPEC member allies like Russia, will take the total combined hikes for April, May, and June to 960,000 bpd, representing a 44 per cent unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.

Sandra Ofor