Global crude oil prices are expected to rise above $80 per barrel this week due to escalating tensions between the United States and Iran. The oil market has reacted strongly to reports of coordinated US-Israeli airstrikes on significant Iranian nuclear sites.
As a result, marketers of petroleum products predict that petrol prices in Nigeria could soon reach N1,000 per litre, influenced by increasing crude oil prices and fluctuating foreign exchange rates.
This situation stems from a “preemptive defensive strike” by the US, which targeted three major Iranian nuclear facilities, as stated by President Donald Trump. He claimed the attack “obliterated” key infrastructure in Tehran, escalating the conflict in the Middle East as Iran responded with threats of self-defense. Iran is the third-largest crude producer in OPEC.
In retaliation, Iranian lawmakers are considering closing the Strait of Hormuz, a crucial channel that transports nearly 20% of the world’s oil, which has caused immediate reverberations in the global energy market, pushing Brent crude prices higher and raising projections for further increases.
Energy analysts warned that if Brent crude reaches the $80 mark, the price of Premium Motor Spirit (petrol) in Nigeria could rise to N1,000 per litre within weeks. Olatide Jeremiah, CEO of PetroleumPrice.ng, noted that private depots are preparing to hike loading costs as early as Monday, stating, “If crude prices rise to $80 or more, Nigerians should expect depot prices to hit N1,000.”
He mentioned that historically, shifts in market dynamics exploit consumers, but expressed hope that Dangote would keep prices stable to prevent depot owners from excessively raising prices. Last week’s price hike was largely due to Dangote’s temporary halt in selling, even as they resumed sales at a price of N880 for two million litres, playing a crucial role in determining petrol prices.
According to the Independent Petroleum Marketers Association of Nigeria, ongoing tensions between Israel and Iran are contributing to rising crude prices and, consequently, global petrol prices. Dangote raised its petrol price from N825 to N880, prompting filling stations like MRS Oil Nigeria to adjust their prices to an average of N955 in various regions. Other stations have increased their prices to between N930 and N960, with Lagos reporting the lowest rates at N925 per litre.
Chinedu Ukadike, IPMAN’s National Publicity Secretary, connected the recent price increases to global crude market volatility and unstable foreign currency exchange rates. He noted, “Brent crude has gone from about $66 to approximately $77 per barrel,” emphasizing that international crude prices directly affect domestic petrol costs and that fluctuations in the exchange rate further complicate pricing.
He highlighted that the increased costs of lifting petrol are pressuring independent marketers to revisit their pricing strategies. He mentioned that the price of petrol could reach N1,000 per litre in some northern regions, influenced by transportation costs.
The interplay of international pricing dynamics and local cost burdens is exacerbating challenges for marketers trying to maintain stable petrol prices. Ukadike explained that since Dangote also buys crude oil at market rates, this limits any potential price advantage over imported fuels.
As of last week, Nigeria’s primary crude grades have reached $79 per barrel and continue to rise due to the military conflict between Israel and Iran, creating concerns about a broader conflict in the Middle East. Data from Oilprice.com showed Bonny Light at $78.62, while Brass River and Qua Iboe were about $79. These new prices slightly exceed the Nigerian government’s budget benchmark of $75 per barrel, potentially offering some temporary fiscal relief.
Analysts cautioned that rising crude prices are likely to lead to increased local fuel prices, as refiners contend with growing crude costs—the primary component for petrol and diesel production. Following the recent geopolitical turmoil, petrol prices rose from N825 to N840, with various stations reporting increases due to changing market conditions.
As for Monday’s prices, adjustments were made across several filling stations, with Rainoil increasing its price from N850 to N900 per litre. Prices ranged from N920 at Sigmund to N910 at Matrix Warri, and NIPCO increased its price to N895 from N827.
With ongoing fluctuations, the Nigerian National Petroleum Company is anticipated to follow suit in adjusting its prices. Geopolitical analysts expect oil prices to rise further, even if immediate retaliation does not occur, suggesting that markets are likely to factor in increased geopolitical risk. Analysts predict Brent crude could gain an additional $3 to $5 per barrel when trading resumes, having settled at $77.01, with WTI at $73.84.
While Brent crude has increased by 11% and WTI by about 10% since the conflict escalated, stable supply conditions and spare capacity among other OPEC members have somewhat limited further price increases. Historically, risk premiums diminish without supply disruptions, underscoring the market’s sensitivity to geopolitical developments.
