In anticipation of EU energy embargoes, the OPEC+ nations agreed to their largest output drop since 2020. As a result, anxieties over skyrocketing inflation are projected to rise as the world’s oil supply is predicted to become constricted.
The move widened the diplomatic rift between the Saudi-backed bloc and the West. The Western nations fear rising energy costs would weaken the already ailing global economy. They also feat that it might undermine efforts to deny Moscow access to the oil market following the invasion of Ukraine. Global oil futures rose to three-week highs after OPEC+ agreed to limit production to 2M BPD ahead of a busy winter.
What Are the Experts’ Predictions?
Participants in the sector predict an increase in spot prices, particularly for Middle Eastern oil, which meets around two-thirds of Asia’s demand. As governments from Japan to India confront growing living costs and as Europe consumes more oil than usual this winter to replace Russian gas, this will exacerbate inflation fears.
SK Energy, South Korea’s largest refiner, explained that they are concerned about a comeback in international oil prices, which have shown some signs of stabilizing since the second quarter. Another source at a South Korean refinery said supply cuts could push prices down to levels seen in the second quarter.
Costs have skyrocketed in South Korea, the fourth-largest economy in Asia and a hub for the manufacturing, due to rising commodity prices. Following concerns about the Ukraine crisis’s loss of Russian oil supplies, Brent touched $139.13 per barrel in March, its highest level since 2008.
According to Saudi Arabia’s Energy Minister Abdulaziz bin Salman, the actual supply reduction will be between 1M and 1.1M BPD due to rising international interest rates and a deteriorating global economy. Washington’s response to such action was swift and harsh, denouncing the OPEC+ agreement as naive.