Among the sectors hardest hit by the COVID-19 pandemic, few have absorbed the blows dealt to the oil sector. The astonishing drop in demand and confidence culminated in negative oil futures, an unprecedented event for the market.
Coinciding with the pandemic-related impact on demand is the rift between Saudi Arabia and Russia, both of which continue to eye market share in Asia and possess the financial wherewithal to withstand the vagaries of the oil market. In spite of a recent rally across benchmark prices during the month of May, buoyed by optimism regarding the restart and recovery of Chinese activity, fears of a prolonged depression in oil markets have taken hold.
Beyond the damage to the OPEC+ alliance, recent events in the oil market portend grave consequences for the heavily oil-oriented economy of Nigeria. In addition to contributing 90% of Nigeria’s export earnings, the price of oil is the primary source of government revenue, which inextricably links the commodity’s price to the government’s budget.