M/East stalemate: Dangote may increase fuel price as Hormuz tensions drive oil prices

. Nigerians groan under high fuel cost

. As oil windfall delivers mixed impact on economy

 

SOPURUCHI ONWUKA, Editor

Growing tensions in the Middle East and the resulting surge in international crude oil prices are beginning to raise concerns about a possible fresh increase in fuel prices in Nigeria, even as Dangote Refinery appears to be taking a cautious and calculated approach to any immediate adjustment of its domestic retail prices.

Checks by Daily Champion on developments shaping supply sentiments in the global oil market indicate that crude oil prices recorded fresh gains over the weekend after the United States rejected ceasefire proposals presented by Iran’s hardline leadership, worsening fears of a prolonged disruption in global energy supply.

United States President Donald Trump on Tuesday openly dismissed the ceasefire proposals submitted by Tehran, describing the conditions outlined by the Iranian government as completely unacceptable and unrealistic.

Sources familiar with the negotiations disclosed that Iran demanded an end to military actions on all fronts, including Lebanon, where Israel continues military operations against Hezbollah militants backed by Tehran.

Iran also reportedly insisted on the recognition of its sovereignty over the Strait of Hormuz, compensation for damages caused by the war, and the removal of the U.S. naval blockade, among several other conditions.

Reacting to the proposals, Trump said the Iranian response undermined the ceasefire announced on April 7 and signaled that the prospects for peace remained weak.

“I would call it the weakest right now, after reading that piece of garbage they sent us. I didn’t even finish reading it,” Trump told reporters while responding to questions on the stalled negotiations.

Before the escalation in hostilities involving the United States, Israel and Iran on February 28, nearly 20 percent of global crude oil and natural gas supplies passed through the Strait of Hormuz, making it one of the world’s most strategic energy corridors.

However, Daily Champion gathered that Iran, as part of its response to the joint U.S.-Israeli military pressure, has effectively shut down the critical shipping route, significantly disrupting the movement of crude oil and other commodities across the channel.

The near closure of the Strait of Hormuz has already started affecting global supply chains, forcing several Middle Eastern oil producers to scale back exports amid growing uncertainty over shipping safety and insurance risks.

Available market data further showed that oil output from members of the Organization of Petroleum Exporting Countries (OPEC) dropped further in April, falling to its lowest level in more than two decades as producers struggled with supply disruptions linked to the conflict.

The worsening geopolitical tensions and supply concerns have consequently pushed crude oil prices sharply upward. From trading at around $65 per barrel in early February, crude prices have now surged beyond the $100 per barrel threshold as global markets continue to react nervously to the prolonged diplomatic deadlock and uncertainty surrounding the ceasefire negotiations.

On Tuesday, the two major global oil benchmarks, Brent Crude traded on the Intercontinental Exchange (ICE) in London and West Texas Intermediate (WTI) traded in New York, both recorded strong gains following reports of widening disagreements between Washington and Tehran.

Brent crude rose by $3.63, representing a 3.48 percent increase, to trade at $107.84 per barrel. Similarly, WTI crude gained $3.49, or 3.56 percent, closing at $101.56 per barrel.

Nigeria’s premium Bonny Light crude grade also crossed the $110 per barrel mark, trading at approximately $110 per barrel, while other Nigerian crude blends maintained prices comfortably above the $100 range.

Figures obtained from OPEC’s official price dashboard showed that Brass River crude traded at $109.23 per barrel, while the closely related Qua Iboe grade sold at $109.13 per barrel despite both grades recording slight daily declines of about $0.96 per barrel.

For Nigeria and many other African economies that are heavily exposed to fluctuations in global oil prices, the implications of rising crude prices remain mixed and complicated.

On one hand, higher crude prices provide a significant revenue boost for the government through increased oil export earnings, particularly at a time when fiscal pressures remain high. On the other hand, the same increase translates into higher domestic energy costs, worsening inflationary pressures, increasing transportation expenses, and deepening operational challenges for businesses already struggling with economic instability.

With the latest surge in international crude prices, indications have emerged that Dangote Refinery may be considering another upward review of fuel prices across its various petroleum product lines supplied to the domestic market.

Industry sources close to the refinery hinted that the company, which only recently implemented a quiet increase in the pump price of petrol, has again begun reviewing global oil price movements to determine the scale and timing of any fresh adjustment.

According to one of the sources, the management of the refinery has become increasingly strategic in interpreting international market signals and now relies more on long-term pricing patterns rather than reacting immediately to temporary spikes triggered by political rhetoric or short-lived geopolitical events.

The source explained that although the company cannot completely ignore the impact of rising crude costs, management is wary of implementing aggressive price increases that may destabilize the domestic market further.

While the possibility of another fuel price increase remains high if the ceasefire talks continue to stall and tensions in the Middle East persist, the source noted that any eventual adjustment by Dangote Refinery is likely to be moderate and may not fully correspond with the sharp increases currently being recorded in the global crude market.

Unfortunately, the rising cost of crude oil and security premium on global shipping caused by the Hormuz impasse have made it increasingly difficult for other players in the domestic fuel market to intervene with alternate supplies.

Our source stated that rising freight cost, insurance premium and sundry risks associated with longer sailing routes have build massive cost on fuel importation since, according to them, supplies from refineries in the Middle East have been isolated from market supplies.

Daily Champion reports that fuel prices continue to play a central role in Nigeria’s inflation dynamics, with increases in petrol and diesel prices often triggering broader increases in transportation fares, food prices, manufacturing costs, and the prices of essential commodities across the country.

As global uncertainty surrounding the Middle East conflict continues to deepen, analysts warn that Nigerian consumers and businesses may once again face mounting economic pressure if international oil prices remain elevated in the coming weeks.