Global oil prices on the rise again after Saudi Arabia, Iraq, and Gulf states cut output
Brent crude oil prices have spiked by more than 5%, trading above $84 a barrel after major oil exporters announced surprise cuts in production. Saudi Arabia, Iraq, and several Gulf states made an announcement on Sunday that they will be reducing output by over a million barrels of oil per day.
Following the announcement, Russia declared that it will extend its cut of half a million barrels per day until the end of 2023. The increase in prices comes after prices initially soared in 2022 when Russia invaded Ukraine.
Despite the surge in prices, the US continued to call for an increase in output in order to keep energy prices low. High energy prices have historically driven up inflation rates which put a financial strain on households.
Yael Selfin, the chief economist of KPMG, has warned that the oil prices surge could worsen the battle to bring down inflation rates. The biggest impact will be on transport costs as we could see a rise in fuel prices, potentially leading to a longer time for inflation rates to come down.
A spokesperson for the US National Security Council has stated that the US “doesn’t think cuts are advisable at this moment given market uncertainty.” Despite the concerns, Saudi Arabia is still reducing output by 500,000 barrels per day and Iraq by 211,000. The UAE, Kuwait, Algeria, and Oman are also making cuts. This reduction is being made by members of the Opec+ oil producers, who collectively account for 40% of the world’s crude oil output. Despite initial concerns, it remains to be seen how this cut will specifically impact households’ energy bills.