Crude oil prices rise higher than 2015 budget benchmark

• OPEC warns against cost speculation

Crude oil prices have continued to be on an upward swing in the last few days, signalling hope of better economic fortunes for Nigeria and other Organisation of Petroleum Exporting Countries (OPEC).

Brent crude futures rose towards $66 yesterday, which is far above the approved $53 per barrel benchmark for crude oil in Nigeria’s 2015 budget.

The price of OPEC basket of 12 crudes stood at $62.03 a barrel on Monday, while it recorded $62.44 the previous Friday.

June Brent crude was up 88 cents at $65.79 (£42.02) a barrel by 14.52 London time, easing back from an intraday high of $66.45 a barrel.

June West Texas Intermediate (WTI) rose 58 cents to $59.83 a barrel, after touching $60.55 a barrel earlier in the day.

Meanwhile, OPEC has warned against price speculators, accusing them of contributing to the uncertainty in crude oil prices.

Speaking on the recent uncertainty in crude oil prices, OPEC in a commentary titled: “Gambling on oil: The price the market pays”, stated that the organization did not believe that actual market fundamentals warranted the almost 60 per cent drop in prices witnessed in the last few months.

It stressed that it was clear that speculators had also played a role in the fall.

According to the oil cartel, when international crude oil prices fell by over $50 per barrel between June 2014 and January this year, many industry commentators were quick to lay the blame squarely on growing oversupply in the market. “Yes, a surge in non-OPEC supply, during weak demand, was the main culprit. But there was one other important factor that contributed to the downturn, especially as the price decline gained momentum. And that was speculation”.

OPEC warned of the actions of speculators as they ply their trade on the various energy exchanges around the world.

These playmakers, it said, that comprise many entities, thrive on risk and opportunity and are driven by the prospect of making maximum profit out of minimum exposure.” When the conditions in the market are ripe, they ghost onto the trading stage. Like puppeteers, they pull the strings from the wings, manipulating positions and unsettling what are already delicate and often precarious trading environments. Prowling the exchanges, they are quick to exploit any situation that can bring them the desired big pay day that feeds their burning ambition and bank balances. They can be unscrupulous, at times ruthless, especially when the stakes are high.

“A golden opportunity presents itself to these ‘investors’ when crude oil prices fall suddenly, as has been the case most recently. At the opportune time, they flood into the market and buy up massive quantities of so-called paper barrels, of course at the lowest price possible.