Oil price hikes are expected as OPEC+ announced that it will limit oil production over January-December 2024 and Saudi Arabia declared an additional voluntary one-month 1 million-barrel-per-day cut starting this July, which can be extended.
LIMS explained that the present situation in the oil market revolves around the efforts of Saudi Arabia and OPEC to maintain a reference oil price of around $80-$81 per barrel to support their budgets and finance major internal projects. The concerns lie in the impact of oil price increases on gas prices, inflation and the potential for a global economic recession. The release of strategic oil reserves in oil importing nations like the United States might be able to anchor gasoline prices. However, the oil price hikes combined with vulnerabilities in the banking system and interest rates hikes present risks for the global economy. The Federal Reserve is expected to raise interest rates in the near future, considering an active labor market and ongoing inflation concerns. The need to raise oil prices is driven by the presence of global inflation, and if inflation declines alongside a stronger dollar, the extent of oil price increases may not be necessary.
- Markets | The “OPEC +” Alliance Avoids Divisions By Agreeing To A New Production Cut, June 7, 2023: Al Jazaer Al Dowalya, TV Interview AR