Oil prices have been on the rise for the past few weeks, with Brent crude futures and West Texas Intermediate crude futures set to post a fourth consecutive week of gains. However, concerns over the impact of OPEC+ production cuts on oil supply and the global economy have led to a slight drop in oil prices. The International Energy Agency (IEA) has warned that the cuts could hurt consumers and global economic recovery
The OPEC+ Decision
Last week, OPEC and other producers led by Russia, collectively known as OPEC+, announced a decision to further cut output by 1.16 million barrels per day. This decision followed easing concerns over a banking crisis last month and was seen as a positive move for the oil market, leading to a fourth consecutive week of gains for Brent crude futures and West Texas Intermediate crude futures.
However, the IEA has warned that this decision could hurt consumers and the global economic recovery. The agency cited downside risks to summer oil demand and the potential for inflated prices for basic necessities, which could impact the economic recovery and growth.
The OPEC+ decision has had a mixed impact on oil prices. While the announcement initially led to a rise in oil prices, concerns over the impact of the cuts on oil supply and the global economy have led to a slight drop in prices.
Brent crude futures were down 10 cents, or 0.12 per cent, to $85.99 per barrel at 0900 GMT, while West Texas Intermediate crude futures slipped 9 cents, or 0.11pc, to $82.07 a barrel. Both contracts were set to post a fourth consecutive week of gains, but the gains were lower than expected due to concerns over the OPEC+ decision.
Influence on buyers
The IEA has warned that the OPEC+ decision could hurt consumers, particularly those who are already struggling to make ends meet. The agency warned that consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly, which augurs badly for the economic recovery and growth. The cuts could lead to a supply deficit, which could further drive up oil prices and impact the affordability of basic necessities.
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The impact of the OPEC+ decision on consumers will depend on a range of factors, including the extent to which oil prices rise and the impact of rising prices on the cost of living. Consumers in countries that rely heavily on oil imports, such as India, could be particularly impacted by the OPEC+ decision.
The decision by OPEC+ to reduce oil production has produced varying effects on oil prices and may have significant consequences for both consumers and the global economy. While the decision was seen as a positive move for the oil market, concerns over the impact of the cuts on oil supply and the global economy have led to a slight drop in prices. The potential for a supply deficit and further increases in oil prices could impact the affordability of basic necessities, particularly for vulnerable members of society. As the global economy continues to recover from the COVID-19 pandemic, the impact of the OPEC+ decision will be closely watched.