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Oil prices climbed above $95 a barrel on Tuesday for the first time since 2023 as supply cuts from Saudi Arabia and Russia stoked concerns that supply shortages could damage the global economy.

International benchmark Brent crude oil prices rose to $95.33 a barrel and are expected to challenge $100 a barrel this month, with prices rising nearly 30% since June.

Saudi Arabia and Russia’s decision to reduce supply despite rising oil prices has heightened tensions with developed economies, with the International Energy Agency warning last week that they “plunge world oil markets into huge deficits”.

Rising oil prices pose a challenge to the central bank’s ability to control inflation, and rising fuel costs could weigh on economic growth. Riyadh and Moscow announced they would extend voluntary oil supply cuts that were due to expire this summer until the end of the year.

“Together with Russia, Saudi Arabia has a firm grip on the oil market,” said Bjarne Schieldrop of Norway’s SEB Bank.

“Our market supply and inventories are tight . . . so the extent of the oil price decline should be limited.”

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman insisted on Monday that the kingdom’s actions were not aimed at “raising prices” and attacked international financial institutions funded mainly by OECD members. Energy Agency, saying it should be “ashamed” of its recent forecasts. He believes that the strength of the world economy is “unsettled”, which means Saudi Arabia must preemptively manage supply to prevent global growth from slowing.

But the conflict highlights growing differences over oil policy between Western powers and Saudi Arabia, which is widely seen as becoming more assertive than its traditional allies in safeguarding its financial interests.

Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler and half-brother of Prince Abu Dalziz, is widely believed to favor higher prices to support his ambitious and costly economic and social agenda. reform plan.

Big oil producers are also angered by efforts to limit oil use in favor of renewable energy and electric vehicles, which they see as a long-term threat to their economic security.

International Energy Agency chief Fatih Birol said last week that the IEA believes demand for oil, gas and coal will all peak before 2030. However, members of the OPEC cartel criticized this view, accusing the IEA of exacerbating volatility and undermining economic development. Confidence in oil investment.

The chief executive of Saudi Arabia’s state energy company Aramco said on Monday that forecasts of peak oil demand were “ebbing under review” and predicted that global consumption would grow by nearly 10% by the end of the decade.

Western governments have become more active in supporting renewable energy in recent years, but are still keen to keep oil prices moderate to support the wider economy.

They also want to ensure that Russia is not bogged down by oil revenues – the biggest contributor to Moscow’s budget – as the war in Ukraine approaches 18 months. While the G7 imposes a $60-per-barrel “price cap” on Russian oil shipped using Western services, Moscow has increasingly used its own “shadow fleet” to keep exports flowing.

Last October, the White House accused Saudi Arabia of “aligning” with Russia after the two countries led OPEC+ to begin cutting oil supplies, even though Moscow had already caused the energy crisis by cutting natural gas supplies to Europe.

But as Saudi Arabia has deepened and extended production cuts in recent months, the White House’s public response has become more restrained, even as pressure mounts on President Joe Biden to rein in oil prices.

The Biden administration is seeking to score a major foreign policy victory by convincing Saudi Arabia to normalize ties with Israel while retaining influence over a kingdom that is strengthening ties with China and Russia.

Republican candidates including Donald Trump have used rising oil prices and Biden’s handling of Saudi Arabia to attack his administration ahead of next year’s presidential election.

Analysts at PVM oil brokerage said six central bank meetings this week, including those in the United States, Britain and Japan, “will do little to calm nerves as sharp reductions in (oil) supply are weighed against a less reassuring economic outlook.” The conflict continues.”


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