- Economists warned that higher oil prices could make it harder to bring down the cost of living.
- Brent crude prices rose after Saudi Arabia, Iraq and several Gulf states said on Sunday they were cutting output by more than one million barrels of oil a day.
- Diesel 17p more than petrol despite oil price falls Petrol price rise warning after oil output cut The reduction in output is being made by members of the Opec+ oil producers.
With the unexpected production cuts announced by some of the top exporters in the globe, oil prices have risen, as reported by BBC.
After increasing by more than 5%, the price of Brent crude oil is now trading above $84 a barrel.
Experts cautioned that escalating oil costs might make lowering living expenses more difficult.
The RAC motoring club, however, stated that it does not anticipate a jump in gasoline prices until the higher oil price is maintained for several days.
After Saudi Arabia, Iraq, and numerous Gulf states announced on Sunday that they were reducing output by more than one million barrels of oil per day, Brent crude prices increased.
Moreover, Russia announced that it will continue to reduce 500,000 barrels per day until the end of the year.
The share prices of energy behemoths BP and Shell increased on Monday, jumping by more than 4% each.
Oil prices have since returned to the pre-conflict levels after surging when Russia invaded Ukraine.
To cut energy prices, the US has however been urging producers to raise supply. We don’t think cuts are advisable at this time given market volatility, and we’ve made that plain, a US National Security Council spokesperson said.
Difficult to reduce inflation
Rising energy and fuel costs have contributed to an increase in inflation, or the rate at which prices rise, placing strain on the budgets of many households.
The rise in oil prices, according to KPMG’s chief economist Yael Selfin, could make it more difficult to reduce inflation.
The increase in household energy costs won’t always result from rising oil prices, she added.
She explained, “The energy price cap, from which people will benefit, has already been established using earlier market predictions. Moreover, residential energy use is typically more gas-based than oil-based.”
Stability of oil market
There have also been concerns that rising gasoline prices may affect transportation expenses.
The RAC stated that it does not anticipate this to occur anytime soon.
According to Simon Williams, a spokesman for the RAC fuel company, “any abrupt spike in the cost of oil shouldn’t result in a hike in the UK average price of gasoline for a fortnight, unless of course, the barrel price stays higher for many days.”
Members of Opec+ oil producers are cutting back on production. The company produces around 40% of the total amount of crude oil produced worldwide.
Saudi Arabia and Iraq both cut production by 211,000 and 500,000 barrels per day, respectively. Cuts are also being made by the UAE, Kuwait, Algeria, and Oman.
According to the official Saudi News Agency, a representative of the Saudi energy ministry described the action as “a precautionary measure aimed at supporting the stability of the oil market.”
Independent oil analyst Nathan Piper told the BBC that the action by Opec+ appeared to be an effort to keep the price of oil above $80 a barrel in the medium term, given that sanctions have only had a “limited impact” on limiting Russian oil supplies and that demand may be negatively impacted by a weakening global economy.
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Source: BBC News