Arab Press

بالشعب و للشعب
Saturday, Apr 20, 2024

Oil prices rise after major producers vow to cut production

Oil prices rise after major producers vow to cut production

The cuts have a number of consequences - as well as higher fuel prices, there is concern about the effect on inflation and wider concerns about those who will benefit, especially the Russian president.
Oil prices are up more than 6% after Saudi Arabia and other major producers vowed to cut production.

Brent crude, the international oil benchmark, increased 5.5% by 9am on Monday to $84.28 per barrel after it was announced that production would be cut by 1.15 million barrels per day from May until the end of the year.

The price climbed throughout the day and hit $85 a barrel on Monday evening - almost 6.5% up.

It comes after a previous production cut announced in October.

The resulting price increases will take some time to filter through to forecourts but will eventually add to the difficulties facing many in the UK during the cost of living crisis.

Rising oil prices will also present a further challenge to central banks trying to keep inflation in check.

There are also concerns that higher oil prices will bolster Vladimir Putin's war chest as the Ukraine war continues.

A number of countries have cut down on the energy they import from Russia since it invaded Ukraine but, according to the International Energy Agency (IEA), Russia is still exporting oil, mainly to China and India.

Kevin Book, managing director of Clearview Energy Partners LLC, said that it could take as much as a year for the cuts to take effect.

'It's a big deal... you could have a very significant price response'

However, even though the production cut accounts for only a small amount of the world's daily usage, the impact on prices could be big, he added.

"It's a big deal because of the way oil prices work," he said.
"You are in a market that is relatively balanced.

"You take a small amount away, depending on what demand does, you could have a very significant price response."

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "The development comes as a blow for inflation, with expectations of inflation coming down partly balancing on the trajectory of the oil price.

"Markets are aware that if the pressure continues, central banks will need to extend or strengthen their interest-rate hiking cycles, the expectations of which will need to be repriced."

Nigel Green, chief executive of deVere Group in Dubai, said: "The dramatic cut will only add to pressing global inflationary squeezes.

"The oil price rises can be expected to increase the cost of production and transportation, reduce consumers' purchasing power, disrupt supply chains, and lead to higher inflation expectations.

"There's real concern that the surprise decision announced by Saudi Arabia for OPEC+ will prompt central banks to maintain interest rates higher for longer, due to the inflationary impact, which will hinder economic growth."

'Stabilising the oil market'

The Saudi Energy Ministry has said its cuts are a "precautionary measure" aimed at stabilising the oil market.

Cuts were also announced by Iraq, UAE, Kuwait, Kazakhstan, Algeria and Oman.

On top of these cuts, Russia's deputy prime minister Alexander Novak said his country would extend a voluntary cut of 500,000 barrels until the end of the year, extending a reduction announced in February.

The countries are all members of the OPEC+ group, which includes OPEC (Organisation of the Petroleum Exporting Countries), Russia and others.

OPEC issued a statement following its own meeting on Monday, tallying up the production cuts promised by the countries involved, and adding: "The meeting noted that this is a precautionary measure aimed at supporting the stability of the oil market."

US President Joe Biden's administration later revealed it had been given prior notice by Saudi Arabia of the decision to cut production, but had told officials it disagreed with the move.

National Security Council spokesperson John Kirby told reporters on Monday: "We don't think that production cuts are advisable at this moment, given market uncertainty. And we made that clear."
Newsletter

Related Articles

Arab Press
0:00
0:00
Close
China Criticizes US for Vetoing UN Ceasefire Resolution in Gaza
Saudi Arabia ranks first in UN index for e-government services in MENA
Israel Records 20% Drop In GDP, War In Gaza Is The Reason
Saudi Arabia's FDI Inflows Grow with New International Standards
Venture Capitals Power Up Across MENA Region
PM Modi Announces Opening Of New CBSE Office In Dubai
January Funding for MENA Startups Totals $86.5 Million
Saudi Arabia accelerates digital economy growth through Nvidia partnership
Israel unveils tunnels underneath Gaza City headquarters of UN agency for Palestinian refugees
Israel deploys new military AI in Gaza war
Egypt threatens to suspend key peace treaty if Israel pushes into Gaza border town, officials say
Saudi Arabia Warns Of A "Humanitarian Catastrophe" If Israel Moves On Rafah
US University To Shut Qatar Campus Due To "Heightened Mideast Instability"
Facebook and Instagram Ban Iran's Supreme Leader
Defense Technology Showcase Held in Riyadh
Saudi Arabia’s non-oil exports rise 2.5% to $6bn in November 2023: GASTAT
Rolls-Royce Executive Encourages Saudi Women to Tap into Their Inner 'Superhero' for Success in Defense Industry
Saudi Arabia launches National Academy of Vehicles and Cars
Saudi Tourism Minister Reveals Plan for 250,000 New Hotel Rooms by 2030
SAR to more than double eastern network passenger capacity with new trains deal
Saudi Arabia Enhances National Defense with New Partnerships
Saudi Aramco Maintains Arab Light Crude Pricing to Asia for March
NEOM Establishes New York Office to Support Investors
Saudi Wealth Fund Draws in Over $25 Billion Worth of Investments in Three Years, Al-Rumayyan Reveals
The Saudi Kingdom's Ultimatum to Israel: A Win-Win Peace with Saudi Arabia and the Arab World, or a Lose-Lose Continued Occupation and Endless Conflict
Biden condemns anti-Arab hate after WSJ opinion piece calls Dearborn ‘jihad capital’
Turkey Releases Seven Hostages Captured by Pro-Gaza Gunman
Arab Parliament Commends Women's Contributions to Societal Development
British and Hungarian Foreign Ministers visited Lebanese leaders to stress the importance of enacting UN Resolution 1701
Yemen's Houthis Say They Targeted British Merchant Vessel In Red Sea
Donald Trump Nominated for Nobel Peace Prize for 'Historic' Middle East Policy
US lawmakers approve F-16 jet sale to Turkey following NATO expansion support
Saudi Arabia Climbs 25 Places in World Bank's National Statistics Indicator
Tourism Growth in Saudi Arabia Fuels Advancements in the Hospitality Industry," Says Rotana Official
Houthi Rebels Request Departure of UN Staff from Yemen, Including US and UK Personnel, within a Month
Modi Inaugurates Hindu Temple on Site of Demolished Mosque in India
Over 25,000 Deaths in Gaza Amid Israeli Offensive
Escalating Clashes in Gaza as Israel Distributes Leaflets to Assist in Locating Hostages
Turkey's First Astronaut Set to Launch for International Space Station Today
Head of Palestinian Investment Fund Warns More People May Die of Hunger Than War in Gaza
Palestinian Envoy Criticizes UK for Alleged 'Double Standards' in Policies Toward Israel
Morocco to Lead UN Human Rights Council in 2024
Is artificial intelligence the solution to cyber security threats?
Egypt has been identified as the leading military force among Arab nations and ranks 15th globally
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Iranian Nobel Laureate Narges Mohammadi Receives Additional Prison Sentence
"Gazans Urge Israeli Forces to Target Hamas in Leaked Audio"
Biden States US and UK Airstrikes on Houthis Were a 'Defensive Action
Large Pro-Palestine Rally in London as Gaza Conflict Hits Day 100
South Africa Urges World Court to Halt Israeli Actions in Gaza
×