Sopuruchi Onwuka

Global petroleum prices over the weekend offered little comfort that the oil price benchmark underpinning Nigeria’s 2026 budget will hold, raising fears of a repeat of the 2025 shortfall triggered by an unusually bearish market.

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Although fiscal planners corrected the overly optimistic crude output assumption that undermined the 2025 budget, projections for 2026 are built on what the government describes as conservative assumptions: a crude oil benchmark of $64.85 per barrel, production of 1.84 million barrels per day, and an average exchange rate of N1,400 to the US dollar.

However, a review of market trends by Oracle Intelligence indicates that oil and gas prices are likely to remain under pressure into 2026, despite a series of geopolitical and supply-side disruptions that would normally support higher prices.

Brent crude has hovered around the $60 per barrel level, largely ignoring escalating geopolitical risks. These include heightened tensions between the United States and Venezuela, Ukraine’s drone attacks on Russian oil facilities, and labour unrest affecting offshore oil production in Brazil.

Analysts note that Brent’s failure to rally suggests markets have become less responsive to geopolitical shocks. The benchmark briefly slipped below the $60 per barrel psychological threshold earlier in the week before stabilising near that level, even as tensions between former US President Donald Trump and Venezuela’s President Nicolás Maduro intensified.

Trump’s naval buildup off Venezuela’s coast and threats of military action have led to tanker seizures in the Gulf of Mexico and effectively tightened Venezuela’s access to international oil markets. Yet prices have remained largely unmoved.

Similarly, European and US sanctions on Russia, combined with repeated Ukrainian drone strikes on Russian energy infrastructure, have failed to generate sustained upward momentum in oil prices.

Labour disputes in Brazil have also had limited impact. Workers at Petrobras began a strike last Wednesday, spreading across offshore platforms in the Campos Basin over concerns about pension fund deficits and proposed changes to compensation structures. While unions say the strike affects all offshore facilities in the basin, Petrobras insists contingency measures are in place to maintain operations.

“Against this background, oil could easily end the year below $60,” an analyst said at the weekend.

Natural gas prices are following the same downward trend. Asian spot liquefied natural gas (LNG) prices have fallen to a 20-month low amid weak demand and ample supply.

Market data show that the average LNG price for February delivery into Northeast Asia dropped to $9.50 per million British thermal units (mmBtu). Demand has softened as several buyers scale back imports. Pakistan, for example, announced plans to cut previously booked LNG cargoes from Qatar from 120 to 85, citing increased domestic gas production.

According to Kpler analyst Nelson Xiong, firm pipeline gas supplies into China and strong renewable power generation in Japan have further dampened LNG demand. He added that warmer-than-normal temperatures across Northeast Asia are likely to reduce heating needs, while LNG supply in the Pacific basin remains abundant.

Martin Senior, head of LNG pricing at Argus, said many buyers are hoping prices will slide below $8/mmBtu.

In Europe, S&P Global Energy assessed its Northwest Europe LNG Marker for February cargoes at $8.881/mmBtu on a delivered basis, representing a $0.54/mmBtu discount to the Dutch TTF hub price. Argus placed the price slightly higher at $8.93/mmBtu, while Spark Commodities assessed January delivery at $9.009/mmBtu.

Oracle Intelligence warns that the market’s resilience to traditional price triggers suggests oil could decisively break below the $60 level in 2026, leaving Nigeria’s budget assumptions exposed from the outset.

While Nigeria’s budgets do not explicitly project revenues from natural gas exports, oil and gas earnings remain central to fiscal stability, accounting for more than 90 percent of the country’s foreign exchange receipts.