ISLAMABAD: Oil prices have risen after several world’s largest exporters announced unexpected production cuts.
Brent crude oil is now trading above $84 per barrel, having risen by more than 5%.
The hike came after Saudi Arabia, Iraq, and several Gulf states announced on Sunday that they would reduce output by more than one million barrels daily.
Furthermore, Russia announced that it will extend its cut of 500,000 barrels per day until the end of the current year. Energy behemoths BP and Shell saw their share prices rise by more than 4% on Monday. Oil prices spiked when Russia invaded Ukraine but have since returned to pre-conflict levels.
However, the US has urged producers to increase output to lower energy prices. Last year’s high energy and fuel prices contributed to inflation – the rate at which prices rise – putting a strain on many households’ finances.
KPMG’s chief economist, Yael Selfin, warned that the rise in oil prices could complicate efforts to reduce inflation. However, she said rising oil prices would not necessarily result in higher household energy bills.
She stated that the energy price cap households benefit from has already been determined based on previous market expectations. She went on to say that petrol is more prevalent than oil when it comes to household energy use. She believes that the greatest impact will be on transportation costs.
In response to the latest cuts, a US National Security Council spokesperson stated, “We don’t think cuts are advisable at this time given market uncertainty – and we’ve made that clear.” Members of the Opec+ group of oil producers are reducing output.
The group accounts for roughly 40% of global crude oil output. Saudi Arabia is cutting output by 500,000 barrels per day, while Iraq is cutting output by 211,000 barrels per day. Cuts are also being made in the UAE, Kuwait, Algeria, and Oman. According to the official Saudi Press Agency, a Saudi energy ministry top official said that the move was “a precautionary step aimed at supporting the stability of the oil market.”
According to Nathan Piper, an independent oil analyst, Opec+’s move appeared to be an attempt to keep the oil price above $80 per barrel in the medium term, given a weakening global economy could impact that demand and sanctions have had a “limited impact” on restricting Russian oil supplies.
