An analysis on the impact of the attack on two oil processing plants in Saudi Arabia, which took out five per cent of the world’s daily petroleum supply, concludes there will be no windfall for Nigeria.
In a report released Monday, SBM intelligence said the plan by the USA to open up its strategic oil reserves, is behind the closure of that possibility. The firm said even if such a window was open, the state of insecurity in the country will limit the extent to which it could stretch its production to meet part of the supply shortfall.
“Given that the US has said it would release oil from its strategic reserves in order to balance supply, there will be no windfall for Nigeria,” the report said.
“Internal instability and insecurity mean that Nigeria’s ability to take advantage of any major conflict in the Middle East is very limited.”
It, however, noted that if the rise in prices holds up, some short term benefit would come to the country. This attack also gives Nigeria an opportunity to continue its longstanding disobedience of the petroleum output quota it reached with its signing of the Declaration of Cooperation in December 2018.
The DoC was an agreement between the Organisation of the Petroleum Exporting Countries (OPEC), and a Russian alliance. SBM expects OPEC not to enforce output restrictions in the light of present happenings.
“Given what has happened in Saudi Arabia, OPEC is unlikely to enforce the production cuts until the Saudis are back in the market,” the report said.
SBM believes that it is unlikely that Nigeria will get the type of revenue rain it did during the Gulf War of 1990-1991. It notes that possibility only if Saudi intends to make a direct hit on Iran, who are believed to be behind the Houthis – responsible for the drone attacks. In such a scenario, the crises would have been drawn out for a long period.
This situation is likely not to play out however, meaning Nigeria would have to use whatever it gains from the little period of increase diligently.
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