Middle East Tension Pushes Crude Higher as Petrol Nears N1,400 in Nigeria

As the crisis between the United States and Iran continues to disrupt global oil markets, the pump price of Premium Motor Spirit, popularly called petrol, is approaching ₦1,400 per litre in many parts of Nigeria.

The development came after the US and Iran failed to agree on a ceasefire to open the Strait of Hormuz, it was reported.

Petrol prices have continued to rise amid the ongoing Middle East crisis and the reported exit of the United Arab Emirates from the Organisation of the Petroleum Exporting Countries on Tuesday.

Brent crude, which was $105 a barrel on Monday, soared to $118 on Wednesday.

Following the hike in crude price, the Dangote Petroleum Refinery has increased the price of petrol at the gantry from N1,200 to N1,275 per litre.

Petroleumprice price data.Confirmation from a Dangote refinery official on Wednesday showed the refinery raised its petrol loading price from ₦1,200 to ₦1,275 a litre while coastal supply prices were increased to ₦1,215 a litre.

The refinery halted its pro forma invoice entry process at about 4pm on Tuesday, a source familiar with the development told Punch, which has thrown the normal supply scheduling across its loading system into disarray.

The suspension led to an immediate stop to the sale of both petrol and diesel to marketers, the source said.

NNPC Increases Crude Oil Prices
The price hike was after the Nigerian National Petroleum Company Limited (NNPCL) raised the official selling prices of all 37 Nigerian crude grades for May-loading cargoes, Oilprice.com reported.

Nigeria is benefiting from the US-Iran war, the report said, as NNPC hiked the price of its flagship grade, Bonny Light, by $6.13 per barrel for May as against April.

“ Nigeria gets the benefits of the Iran war,” the report added. Nigeria’s state oil company NNPC has raised the official selling prices of all 37 Nigerian crude grades for cargoes loading in May, with its flagship grade Bonny Light up by a hefty $6.13 per barrel versus April, while Forcados is up by $7.01 per barrel.”

The development had raised fears that the Dangote refinery could pay more for crude, resulting in increased fuel prices.

Pump Prices Change at Filling Stations
Checks showed that filling stations quickly increased pump prices from an average of ₦1,250 to more than ₦1,300 per litre on Wednesday in Lagos and other South-West states.

In Lagos and Ogun states, petrol goes for between ₦1,315 and ₦1,350 per litre.

Petrol was sold at the Mowe/Ibafo axis of the Lagos-Ibadan Expressway for ₦1,315 per litre by NNPC filling stations and ₦1,320 per litre by Mobil.

In the North and other areas far from the Dangote refinery, prices were higher, petrol was increased to approximately ₦1,400 per litre.

But residents of Ogun border communities said the Federal Government had not permitted the supply of petroleum products in their areas, and petrol was sold for almost ₦1,700 per litre.

The National President, Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, has said that petrol prices may rise further if the crisis in the Middle East is not de-escalated.

Marketers were facing sudden price volatility, making business decisions difficult, he said.

“That’s what we’re introduced to, price volatility,” Gillis-Harry said. And the government is not making any statements about it, so it is worrisome. At least it could come up with some steps.

“Now we are seeing some progress on the price of crude oil. And they can give some back to reduce the cost of transportation. So food is not going to be expensive, along with a few other things. “That is what we have suggested.

He warned that if the crisis persists, petrol may rise above N1,500 per litre.

“If you go back to our predictions, I said it there because Mr Trump is not very clear as to what he wants, in my opinion. If it is to decimate the Iranian nuclear facility or if it is to take over the crude oil as they are taking over Venezuela’s. “I don’t think we know exactly what he wants. So we’re not sure we’re seeing the end of that crisis,” he said.

Retailers want local pricing
Nigeria must improve production and refine more crude locally, said Gillis-Harry.

“So we should observe all those areas and enhance our production value and production speed so we can at least clearly put 2 million barrels into domestic refining.

“That’s going to be much better because then we will be a refining hub to guarantee jobs, to improve businesses and to make our economy more active.”

“Dangote has increased the price again because he is the lord of the manor. “The Dangote refinery has shown his influence in the downstream sector by changing price. So we will continue to adapt.”

The rise in petrol prices was also attributed to the hike in the price of crude by the NNPC, said the PETROAN president.

He said: “Every single increase from any quarter is because we are not trading locally. All products in Nigeria are still benchmarked internationally.

“Even when we are buying crude for local refining in naira, the price is still dollar equivalent. “The only thing it has done is that you are not going to scramble for forex to buy the crude that you are going to refine here.”

He urged the government to extend the naira-for-crude privilege to other refineries producing or about to produce petrol.

Local refineries have also asked the Federal Government to stop using international pricing benchmarks for crude supplied to the domestic refineries.

They said the current structure increases costs and hampers local refining.

Eche Idoko, spokesperson for the Crude Oil Refiners Association of Nigeria, said that crude supplied to local refineries should be priced on the basis of a locally-designed arrangement rather than Brent.

“If you are using Brent to benchmark our pricing, the factors that are affecting the Brent pricing will still affect the price at which you are landing crude here,” Idoko said.

“What we have always said is that the elements in Brent that do not apply to the trade between the local refinery and the oil producers should be discounted. And just like that you have the real cost of crude for local refineries.”

One option available to the government was to sell crude to Dangote refinery at a fixed price, said Bismarck Rewane, an economist.

“One of the options that can be explored is that the Federal Government of Nigeria agrees to sell crude at a particular price to the Dangote refinery with the assurance that the price of refined products does not increase,” he said.