Saudi Arabia, a major player in this trend, has hinted at even more significant oil production cuts in the near future.
Brent crude oil prices have surged to their highest point this year, driven by anticipated reductions in oil production cuts from key exporting nations
Experts suggest Brent crude may reach $100 per barrel, a level reminiscent of the post-Ukraine invasion era. This increase in oil production cuts could lead to higher interest rates, warns economist Jorge León of Rystad Energy, potentially resulting in more tightening measures, especially in the U.S., to combat inflation. Michael Tran of RBC Capital Markets LLC notes the growing influence of oil producers on the market, dubbing them the “Central Bank of oil.”
This extension of oil production cuts may result in a deeper deficit in the global market in the fourth quarter of 2023, cautions Warren Patterson, head of Commodities Strategy at ING Groep N.V. Concerns over demand and rising Iranian supply could temper price hikes. ING projects that Brent oil will average $92 a barrel for the rest of the year. The U.S., in particular, is sensitive to this price surge, as the Biden administration works to prevent $4-a-gallon gasoline. With gas prices already at their highest seasonal levels in over a decade, renewed inflationary pressures could strain consumers and disrupt global central bank efforts to control inflation.
Global leaders may turn to sanctioned oil production cuts exporters for relief, as Iran’s exports surge in response to Saudi cuts. Venezuela, also under sa
Investors are responding by divesting government bonds, including 10-year Treasury bills, amid concerns that central banks will need to maintain a hawkish stance on interest rates to counter the inflationary impact of rising energy prices
Corporate bond issuances this week have further unsettled debt markets. In the stock market arena, energy-related companies have significantly outperformed other sectors recently. The Energy Select Sector SPDR Fund (XLE) has seen a 15% increase over the past three months, surpassing the SPDR S&P 500 ETF Trust (SPY) by threefold and outstripping the Invesco QQQ Trust of the Nasdaq 100 by more than double.
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