Saudi Aramco, the Saudi Arabia state oil company, announced a new pricing strategy which has differential pricing.
They plan to sell crude oil at cheaper rates to Asian countries and at higher rates to the United States of America and others.
Saudi Arabia is apparently trying to protect it’s market share in reaction to output coming into the market from Iran and Iraq in greater volumes.
Readers of Naira Insider will know that we predicted that Saudi Arabia and other Arab states would have to address the holes in the pockets left by the lower oil prices.
This is one such gambit.
How this affects the global price index remains to be seen; However, this development is bad news for Nigeria.
Saudi Arabia price cuts to Asian countries (which presumably includes India, China etc), hits Nigeria in its precise target markets.
This is as painful as it seems.
Since US enthusiasm for buying Nigerian Oil has waned, our exports to China and India have grown.
These two countries have been the buyers that have saved Nigeria’s oil industry in recent dark months.
So the news that Saudi plans to drop prices in these markets is terrible news for Nigeria.
Price competition for our limited customers is all we need.
We should watch regional prices with care.
If the Federal Government can only gather 50% of budgeted revenue (as recently stated in January 2017 official figures), then lower oil prices in key markets will be extremely problematic and difficult for the FG to explain to the masses.