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Oil prices leap as Saudis announce extended export cutback

Photo: AdobeStock Front view of tanker at sea
File photo of tanker
Brent oil prices have risen by more than 8% over the las two weeks and are set to rise further as Saudi Arabia and Russia extend oil export cuts.

Saudi Arabia is to extend its 1 million barrels per day (bpd) oil cut until December as Russia prolongs its 300,000 bpd reduction too. Oslo analysts at Rystad Energy predict that higher oil prices are now inevitable as winter in the northern hemisphere comes closer.

The moves by producers freaked the markets yesterday with benchmark oil prices rising sharply. Intercontinental Exchange (ICE) Brent front month prices have smashed through $90, the highest price since November 2022. The Rystad analysts believe that global liquids demand will outstrip supply by about 2.7 million bpd in the last quarter of the year.

Energy prices are a fundamental component of the global economic backdrop. Volatile fluctuations in gas and oil costs have propelled inflation in energy consuming nations since Russia invaded Ukraine in February 2022. They have also driven frightening food inflation in many regions. But even the US, a major energy producer, has been struck by inflation woes too.

Referring to the Saudi move, Rystad predicted in a market update: “The extension of this longer cut until December implies a significant shift in our balances. Moreover, this would lead to the highest semi-annual deficits since the second half of 2021 but with the added pressure of starting from much lower stock levels both for crude and products.”