The Head of Research at Sterling Asset Management and Trustees Limited, Dr. Patrick Ejumedia, said the recent decline in global oil prices is being driven by the reopening of the Strait of Hormuz, stable demand conditions and the unwinding of speculative positions in the market.
Speaking in an interview with ARISE NEWS on Thursday , Ejumedia explained that the easing of tensions around the Strait of Hormuz had removed a major risk premium previously embedded in crude oil prices.
On the factors behind the decline in oil prices, he stated:
“The opening of the Strait of Hormuz, which everybody is celebrating at the moment, is one factor. Demand has also remained relatively stable, and activities of speculators who bought at relatively high prices and are now selling are also pushing prices down.”
Speaking on whether the trend is sustainable, he said:
“Yes, it is stable for the short term because we have at least a 60-day period with the Strait of Hormuz open. But how long that lasts will depend on OPEC’s reaction, global economic activity and any developments affecting the Strait again.”
Addressing the significance of Iran’s assurances that ships would not face new restrictions through the Strait of Hormuz, he said:
“About 20% of global oil consumption passes through the Strait of Hormuz. The assurance has removed tension and made traders take away the risk premium they had placed on crude oil prices, which is why prices are coming down.”
On geopolitical risks that could push prices higher again, Ejumedia noted:
“If there is a breakdown in the agreement between Iran and the United States or an attack on energy infrastructure, that can drive energy prices up again. Another crisis elsewhere in the Middle East could also increase prices.”
Explaining the disconnect between falling crude prices and retail fuel prices, he said:
“The pump price is a combination of crude oil costs and other costs such as transportation, logistics, storage and marketing. So crude prices can fall while those other costs remain high.”
Speaking on Nigeria’s fuel market, he added:
“The prices of refined products in Nigeria are largely tied to international oil prices. If we are able to increase domestic refining capacity, we may not experience the same level of impact.”
On whether Nigerians should expect lower petrol prices if Brent crude remains below $75 per barrel, he stated:
“Of course, but after the adjustment period. Sellers typically clear existing stock before reflecting lower costs, and the duration of lower crude prices will also matter.”
Addressing the implications for Nigeria’s 2026 budget, he said:
“If oil prices fall below the benchmark in the budget, it will affect revenue, reserves and foreign exchange earnings. However, higher oil production can help offset the impact of lower prices.”
On the need to strengthen domestic revenue generation, Ejumedia said .
“We need to be looking inward at how we can raise revenue domestically. The major source of government revenue globally is taxation and Nigeria still has significant room for improvement in that area.”
Discussing the impact of lower oil prices on government spending, he said:
“If oil prices drop below budget assumptions, it could result in increased borrowing because government would still need to finance infrastructure and social spending.”
On the implications of the Strait of Hormuz reopening for Nigeria’s crude exports, he explained:
“Countries like Iran will be able to increase supply, and that additional supply will compete in markets where Nigerian crude is sold. A flood of oil into the market naturally puts downward pressure on prices.”
Giving his outlook for investors and policymakers, Ejumedia concluded:
“Key indicators to watch include developments in the Strait of Hormuz, OPEC’s response, global demand conditions, Nigeria’s oil production levels, and exchange rate stability. These factors will determine the direction of oil prices and their impact on Nigeria.”
Goodness Anunobi
