The price of crude oil in the international market has surged higher thereby giving the needed inspiration to the faltering Nigerian economy.
Oil rebounded on Wednesday following a report that the US stockpile dropped to its biggest one-week low this year.
The US crude inventories dropped by 5.2 million barrels last week, according to the US Energy Information Administration. This is more than the 1.8 million-barrel predicted by analysts.
The Brent crude oil climbed 3 percent to $50.27 per barrel as at 6:15 Nigerian time. While, the US West Texas Intermediate oil surged to $47.44 a barrel.
However, analysts have said it is hard to see how this one-off drop in US production would change oil outlook and ease investors’ concerns going forward.
“It is difficult to see how the day’s gains last,” said a partner at hedge fund Again Capital in New York, John Kilduff. “US crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak.”
Brent, against which half of the world’s oil is priced, has endured a volatile past, plunging from more than $100 a barrel in 2014 to $26 in February 2016.
While, it has since recovered mildly, there were concerns regarding how OPEC would sustain current market price in the face of rising U.S. production.
Experts have said other fundamentals within OPEC member nations have to be addressed before another successful consensus could be reached.
For instance, a Foreign Exchange Research Analysts at Investors King Ltd., Samed Olukoya said: “The rising oil production in Libya and Nigeria could worsen current progress as both nations were exempted from the ongoing production cut.”
The weakness in the oil price has impacted the oil sector, resulting in about 400,000 job cut globally, while investment in the sector is at a record low.