Oil prices have increased after several of the world’s biggest oil exporters announced cuts in production. Saudi Arabia and other producers of the Organisation of the Petroleum Exporting Countries (OPEC+) announced the surprise cuts. Many economists think this is an ominous sign for global inflation.
The decision saw a spike in the price of Brent crude oil. The international benchmark now stands at over $84 a barrel, jumping by more than 5% on Monday morning. Output will be cut by about 1.16 million barrels per day.
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Experts also warn that higher oil prices could mean the high cost of living will stick around a lot longer. Brent oil futures jumped to over $84 a barrel, while US crude climbed to over $79, reports Al Jazeera.
Experts: angling for higher oil profits
While OPEC+ representatives say the move will support market price stability, experts are of the mind that the group is trying to get higher profits. The Guardian reports that Ipek Ozkardeskaya, a senior analyst at Swissquote Bank says:
Officially, the cartel wants price stability in oil markets…But in reality, they simply want higher prices
Investment banking company, Goldman Sachs lifted its forecast for Brent to $95 barrel by the end of 2023. It adds that consumers can expect it to stand at $100 in 2024, reports Al Jazeera:
Today’s surprise cut is consistent with the new OPEC+ doctrine to act preemptively because they can without significant losses in market share…While surprising, this cut reflects important economic and likely political considerations
Yael Selfin, chief economist at KPMG, warns that this oil price surge will make it much harder to bring down inflation. She does, however, reassure that the rising oil prices will not lead to higher energy bills for consumers, reports the BBC:
The energy price cap, that households benefit from, has already been determined using earlier market expectations…Plus, when you look at energy use in households, it tends to be more gas-heavy rather than oil
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And then Russia walks in
Russia says it will extend it cut of half a million barrels per day until the end of this year. Oil prices first reached sky-heights when Russia invaded Ukraine. Now, however, these oil prices are reportedly back to levels seen before the war started.
On the other side, the United States is calling for producers to increase their output. All in the hopes it will push energy prices lower. A spokesperson for the US National Security Council says the decision to cut production is ill-advised, given market uncertainty, reports the BBC.
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High fuel and energy prices are driving up inflation at rates that have put immense pressure on household finances.
