Oil reached a 2016 high of $43 per barrel on Tuesday, as latest pricing template released by the Petroleum Products Pricing Regulatory Agency (PPPRA) revealed that the subsidy on premium motor spirit (PMS), also known as petrol, has risen from N5.84 per litre to N9.09.
In the template released on Tuesday, PPPRA put the cost plus freight of imported petrol at N74.83 per litre, with other cost elements hiking the landing cost of the product for marketers to N81.44 per litre.
With a distribution margin at N14.30 per litre, the expected open market price of the product rose to N95.74 per litre. But the federal government fixed the ex-depot price at N76.50 per litre, while the retail price was fixed at N86.50 per litre.
The rise in the price of crude oil was supported by a weak US dollar and further signs of strong demand in China.
Many members of Organisation of Petroleum Exporting Countries (OPEC) and outside producers like Russia are meeting in Doha, Qatar, on Sunday to discuss freezing output.
The dollar fell to its lowest in nearly eight months against a basket of currencies, supporting commodities.
Brent crude was up 50 cents at $43.33 a barrel and had earlier in the session reached a 2016 high of $43.53 per barrel.
US crude gained 39 cents to hit $40.75 a barrel.
“The weak dollar is one important reason,” said Eugen Weinberg of Commerzbank, adding “also, the fact that we are above $40 and at multi-month highs is also contributing to the price increase as it is prompting some speculative buying”.
Also supporting prices are rising vehicle sales in China, a further sign of strong gasoline demand and a plan by thousands of oil and gas workers in Kuwait to go on strike from Sunday.
“If it is not clear that the strike will last long and will have any meaningful impact on exports or domestic production (including refineries), it does illustrate further the amount of pain that (Gulf) oil producers are also facing at current price levels,” said Olivier Jakob, analyst at Petromatrix.
Oil prices have collapsed from above $100 per barrel in mid-2014 due to over-supply.
OPEC’s decision in November 2014 to abandon its traditional role of cutting output helped deepen the decline. Crude gained a boost last week after a surprise decline in US inventories from a record high.
But this week’s US supply reports are expected to show an increase in stocks of 2.8 million barrels.
Industry group, the American Petroleum Institute, is scheduled to release its report on Tuesday, while the government’s figures are due to be out on Wednesday.
