The prices of crude oil took a significant tumble on Wednesday, as demand concerns loom large amid broader economic challenges.

Brent crude oil futures experienced a sharp decline, falling by $2.02 or 2.22 percent to $88.90 per barrel at 1228 GMT. Simultaneously, U.S. West Texas Intermediate crude (WTI) also suffered a loss, dropping by $2.10 or 2.35 percent to $87.13 per barrel, as reported by Reuters.

The decline in oil prices is attributed to a combination of factors, including ongoing cuts in crude oil production by Saudi Arabia and Russia, set to continue until year-end, and growing worries about demand due to economic headwinds.

Investec analyst Callum Macpherson weighed in on the situation, saying, “Market attention has shifted from the focus on the short-term tightness to the implications of interest rates staying higher for longer, the subdued macro environment that entails, and how OPEC+ plans to deal with that when it meets on 26th November.”

OPEC and its allies agreed to cut oil output by 2 million barrels per day in November of the previous year, marking the deepest reduction by OPEC+ since the 2020 COVID-19 pandemic, despite pressures from the United States and other quarters calling for increased output.

In April, OPEC announced a “voluntary reduction” of 1.66 million barrels per day in its crude oil production, commencing in May and extending through the year-end, according to a report by PremiumTimes.

This additional cut is in addition to the reduction announced by OPEC+ in October 2022, according to the Saudi state-run news agency, SPA. In June, OPEC decided to extend this reduction until 2024, aiming to stabilize the oil market and provide long-term guidance.

On Wednesday, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) kept the group’s output policy unchanged. In their statement following the 50th JMMC meeting, the organization reaffirmed its commitment to the Declaration of Cooperation (DoC), extending to the end of 2024, as agreed in the 35th OPEC and non-OPEC Ministerial Meeting (ONOMM) in June 2023.

The committee expressed readiness to take additional measures if necessary, closely monitoring market conditions and appreciating the voluntary contributions of Saudi Arabia and Russia, both extending their cuts until the end of December 2023.

This decline in oil prices raises further concerns for Nigeria, a nation grappling with revenue challenges, pipeline vandalism, and crude oil theft in its oil-producing regions. In September, the Speaker of the House of Representatives, Tajudeen Abbas, reported Nigeria’s losses of N16.25 trillion to crude oil theft between 2009 and 2020, significantly impeding the country’s oil production growth, with daily losses ranging from 5 to 30 percent of production.