Inflation worries far from over as oil hits 10-mth highs
Oil futures have hit a near 10-mth high after Saudi Arabia and Russia said they would extend voluntary oil cuts to the end of the year.
Saudi Arabia will extend its voluntary oil output cut of 1 million barrels per day for another three months until the end of December 2023. The U.S. and Western allies have urged OPEC+ to raise output to secure lower energy costs and help the global economy. This is also a blow on a political level, as the voluntary curbs allow the Kremlin to collect more revenues to fund its war in Ukraine.
(Video Transcript)
Brent and WTI
Now, oil futures jumped yesterday afternoon to a near 10 months higher for both Brent and WTI after Saudi Arabia and Russia said they would extend voluntary oil cuts, supply cuts through to the end of the year. Let's take a look at the statement. Saudi Arabia says it will extend its voluntary oil output cut of one million barrels per day for another three months until the end of December 2023. US and Western allies have urged OPEC plus to raise output, secure lower energy costs and help the global economy, thus trying to keep inflation down.
The Kremlin
But this is a big blow on a political level, as the voluntary curves allow the Kremlin to collect more revenues to fund its war in Ukraine. And you remember, of course, that despite the fact that Russia is behind this idea to extend the cut, Russia is selling oil around the back door to the likes of China and also India, according to reports.
Oil pricing
And that is sort of bleeding through what is otherwise a system of control on pricing. But nonetheless, this idea that we're seeing a continued squeeze in supply has seen a new recent high for the oil market. Let's take a look at Brent. And yesterday, that spike higher there took us to levels we've not seen since the 17th of November.
Not trading too far away from the highs, 89.78, just below that $90 a barrel level. So if you're long on this, stop this below recent price action. And it's pretty much the same sort of thought on US crude, same sort of spike up yesterday, a little bit of a pullback at the moment.
But nonetheless, if we see a continuation of this idea, we're going to restrict the amount of oil in the markets. And I think that will continue to pick up. That, of course, has long term implications for inflation, long term implications for the direction of the travel of interest rates, and potentially then possibility of increasing chances that the crude will see some economies go into or stay in recession. Thanks for watching. And I'll see you next time.
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