Oil prices have taken a hit, most of which have erased the previously earned gains. Lower growth targets in China combined with Russia’s compliance issues have sparked serious declines in crude oil. As the worry grows, it seems that the prices of oil will continue a slippery slope.
Signs that the United States oil producers are increasing activity also played a role in oil prices, says MarketWatch.
Crude oil was down 0.59 percent at $55.57 per barrel for the global benchmark, and April deliveries for the United States counterpart West Texas Intermediate were also down by 0.54 percent or approximately $53.04 per barrel.
Nigeria Struggling Amongst Leadership Crisis and Oil Prices
Nigeria is in a terrible place now, considering the headlines that read “Who’s Running Nigeria,” are emphasizing that the major oil producer and powerhouse of Africa are failing due to an ailing leader.
Nigerian President Buhari has an undisclosed illness that has sparked violence throughout the region. Already the National Bureau of Statistics reported declines in the economy, while the President himself is not handling day-to-day management of the country anymore.
Because of the controversy, Nigeria has found themselves on the wrong end of the OPEC market, and their already troubled economy and debilitating currency are creating a severe political and economic issues for the area.
The International Monetary Fund has already forecasted that Nigeria will receive a modest growth, which is less than one percent per year. With inflation well beyond the growth, the country will have double-digit inflation and little relief.
Russia’s Non-Compliance Issues
Russia is playing a role in the dropping oil prices, because their energy ministry has already shown output was unchanged from January 2017 — resting at 11.11 million barrels per day. This has created serious doubt about their production compared to the deal made with oil producers in 2016. Russia’s production must fall by 100,000 barrels per day in March to comply with the oil producer agreement they had reached near the end of 2016.
OPEC’s compliance deal agreed to a cut of 1.2 million barrels per day but rose by 94 percent in February. Saudi Arabia was responsible for most the barrel productions, and the current figures from OPEC leave no room for rebalancing the rest of the year.
United States Drilling Rigs Continue to Increase
Drilling in the United States has grown dramatically, with production having an impact on OPEC. If the United States continues to add more drilling rigs and shale production, the decrease in barrel prices is likely to continue.
Investors Reserve Hopes
Investors are going to be tracking the markets globally carefully. They are hoping that the OPEC compliance rate and their agreed cuts for March will help with prices. However, some believe that because Russia does not appear to be following the terms of their agreement, prices will continue the path they are exhibiting.
Russia will not make their contribution until Moscow is convinced the deal is holding firm; therefore, this standstill could dramatically change oil prices for 2017.