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Bearish sentiments of further oil price crash resulting to the inconclusive oil freeze deal seems to be gradually dispelling as oil prices increased to its highest in 2016 at $45.45 per barrel — a 4% increase from the previous day’s price and a 90% increase from the lowest price so far in 2016. The increase has been attributed to the US’ lower than expected rise in oil production last week.
Furthermore, the Kuwait labour action which has caused a 46.4% decline in global oil production by about 1.3 million barrels per day. Similarly, Nigeria losses about 250,000 barrels per day due to the destruction of Forcados pipeline.
These oil production declines have led to an increase in oil prices which impacts the nation’s revenue positively and would lead to an appreciation of the Sovereign Wealth Fund (SWF). A remission of $7.45 per barrel earnings would be made to the SWF based on the total barrels of crude sold.
However, the magnitude of the SWF appreciation could have been much higher if the Forcados pipeline and other pipelines were as fully operational. As such, some of the unexpected gains of the high crude prices could be channeled to the repairs of the vandalized pipeline.
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