Supply disruptions and geopolitical tensions drive sharp rally, but production shortfalls and volatility cloud Nigeria’s oil outlook…..
Nigeria’s crude oil grades delivered a dramatic surge in March, recording their strongest monthly performance in years as global markets reacted to escalating tensions in the Middle East.
Prices climbed by as much as 58 percent during the month, with Nigeria’s flagship Bonny Light crude rising from around $70 per barrel at the start of March to an intraday peak of $119.5 within the first nine days, its highest level since mid-2022.
The rally was largely driven by disruptions along the Strait of Hormuz, a critical global energy corridor responsible for about a fifth of the world’s oil and liquefied natural gas supply. Fears of a prolonged blockade pushed traders to price in significant geopolitical risk, lifting crude benchmarks worldwide.
During the peak of the conflict, European refiners scrambling for alternatives to Middle Eastern supply turned to Nigerian crude. This demand saw Bonny Light trade at a premium to Brent, with prices ranging between $112 and $122 per barrel.
However, the surge has come with mixed fortunes for Nigeria.
While higher prices offer a revenue windfall, the country continues to struggle with production constraints. Current output remains below expectations, hovering between 1.46 and 1.48 million barrels per day, well short of the 1.84 million barrels per day benchmark underpinning the 2026 budget.
In the first two months of the year alone, Nigeria missed its production target by roughly 16.6 million barrels, highlighting persistent operational and structural challenges in the oil sector.
Domestically, the price rally has also filtered through to fuel markets. The Dangote Refinery has repeatedly adjusted its gantry prices in response to rising crude costs, contributing to petrol prices in cities like Abuja climbing to between N1,331 and N1,430 per litre.
Despite the earlier surge, crude prices have shown signs of volatility in recent sessions. Nigerian grades dipped toward $102 per barrel before recovering slightly, following reports later unconfirmed that Iran could be open to ending the conflict.
Comments from Donald Trump suggesting that the United States could conclude its military campaign within weeks added to the uncertainty, though markets remain cautious about the timeline and potential outcomes.
Analysts warn that even if hostilities ease, damage to energy infrastructure and continued disruptions to shipping routes could keep supply tight and prices elevated.
The broader oil market has also been affected. A recent survey indicated that OPEC output dropped significantly in March due to forced export cuts linked to the Strait of Hormuz, prompting analysts to revise their price forecasts upward. Brent crude is now projected to average around $82.85 per barrel in 2026, substantially higher than earlier estimates before the conflict began.
At the same time, additional disruptions from halted production in parts of Iraq to storage constraints in Kuwait are compounding supply concerns.
The persistence of high energy prices is raising fresh fears of global inflation, potentially limiting central banks’ ability to ease interest rates and support economic growth.
For Nigeria, the situation presents a delicate balance: higher oil prices offer increased revenues, but falling production and rising domestic fuel costs could offset much of the potential gains.
As geopolitical tensions continue to shape the market, Nigeria’s oil outlook remains closely tied not just to global prices but to its ability to boost output and stabilise its energy sector.
