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Riyadh: Oil prices surge to 10-month high on extension of supply cuts by Russia and Saudi Arabia through the end of this year, cutting 1.3 million barrels of crude from the global market and sending energy prices higher. Saudi Arabia has announced a cut in crude oil production till December. The announcement comes as Saudi is unilaterally cutting production to prop up slowing crude prices. Benchmark Brent crude climbed $1.21 to hit a 10-month high of $90.21 a barrel soon after the announcement. This is the first time since October last year, when crude oil prices have crossed $90 per barrel. Crude oil prices may increase further if the cuts continue.
The heads of the Organization of the Petroleum Exporting Countries (OPEC) will continue the cut of 1 million barrels per day (bpd) until December, according to a statement issued by the official Saudi Press Agency. A separate announcement from Deputy Prime Minister Alexander Novak said Russia’s 300,000 bpd export cut would remain in effect for the same time frame, the report said.
This step has been taken at a time when the country is unilaterally cutting its production in an attempt to correct the fall in crude oil prices. Investors had expected Saudi Arabia and Russia to extend voluntary cuts through October but the three-month extension was unexpected.
Brent prices have mostly ranged between $75 and $85 a barrel since late October. Crude prices stalled near monthly highs earlier this year, according to brokerage house Geojit, as pessimism over recovery from the pandemic in China put pressure on prices.
This decision of Russia and Saudi Arabia may cause a big blow to the Indian government. The reason for this is the challenge of reducing the prices of petrol and diesel amid the increase in the price of crude oil. Elections are to be held in five states of the country in the coming months.
Will higher crude oil prices affect India
To reduce inflation, the central government has reduced the price of LPG by Rs 200. Since then there are speculations that soon the prices of petrol and diesel will also be reduced. Union Minister Hardeep Singh Puri himself has also indicated this. In such a situation, if the price of crude oil goes beyond 95 dollars, then the Indian government and the petroleum companies may face a big challenge.
However, courtesy claiming that India has boosted its oil trade with Saudi Arabia in order to meet its demand. As of now, there is no confirmation whether India will increase its prices. However, it is unlikely the BJP-led government will increase fuel prices amid the fact the country will go for general elections next year.
