Surging Oil Prices Could Again Frustrate Inflation Fight
OPEC+ continues to create unnecessary strife
Crude prices surged in early trading Monday after a surprise announcement by Saudi Arabia and other major oil produces to slash output by more than a million barrels a day. The move is expected to send gasoline prices higher, adding another wrinkle to broader efforts to rein in inflation.
The unforeseen cut by the oil-producing bloc known as OPEC+ came after it had earlier signaled it would not make further reductions this year. The group framed the latest move as “a precautionary measure aimed at supporting the stability of the oil market.” Analysts are divided on how much it will drive up gas prices, which right now average $3.50 per gallon nationally, according to AAA.
Prices could rise as little as 10 cents, or they could push past $4 a gallon later this year if there is an economic rebound and demand picks up. The additional production cut of 1.16 million barrels per day signaled that OPEC+ forecasts show weaker demand as the summer approaches and some of the world’s largest economies teeter on the brink of recession. But the wild card in such forecasts is China, which is stepping up fuel consumption following coronavirus lockdowns. A continued surge in consumption by China, some analysts caution, could push prices of a barrel of Brent crude back to $100. It was trading at $84.68 on Monday, reflecting a 6 percent jump following the OPEC+ news.
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