Oil price hits 2016 high at $47

Global benchmark, Brent crude, on Wednesday traded around $47 per barrel, its highest level this year, buoyed up by news of falling output and a weakening United States dollar.
Brent, against which Nigeria’s oil is priced, later fell to $46.47 per barrel, after earlier hitting a year-to-date high of $47.05.
The international benchmark has risen by nearly 20 per cent in April, its largest one month gain for the past 12 months.
President Muhammadu Buhari had proposed $38 per barrel as benchmark oil price for this year’s budget, which was recently approved by the National Assembly.
There were fears two weeks ago that a sustained price rally, after almost two years of decline, would be damaged by the failure of the major oil producers to agree to limit oil production at Doha, Qatar, on April 17.
The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said in a telephone interview said “It is a welcome development that oil prices are recovering. But what we need to pay attention to is the fundamental in terms of supply and demand; that has not changed much.
“What has caused this particular spike is the shutdown of some fields in Saudi Arabia and Kuwait. Nigeria is also having some production challenges; so, we have also lost some barrels. The third major factor is that there is a likelihood that the US Fed is not going to hike interest rate this April as expected. So, the dollar is going to weaken.”
Oni said the price might fall below the $40 per barrel mark when Nigeria’s Forcados and Brass River terminals and the shut oil fields in Saudi Arabia and Kuwait are reopened.
“It is good for Nigeria that prices are currently above $40. Our budget is benchmarked on $38, which is good. It means we should be having some money going into the Excess Crude Account. But unfortunately, production is low; so, we may not have any accretion to the account,” he explained.
The dollar has continued to weaken against other currencies, having dropped by five per cent this year. Oil futures are priced in dollars, so a weaker dollar encourages non-US investors to buy.
On Monday, the World Bank said amid improving market sentiment and a weakening dollar, it had raised its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest Commodity Markets Outlook, as an oversupply in markets was expected to recede.
It noted that the crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria, and a decline in non-Organisation of Petroleum Exporting Countries’ production, mainly US shale.