The OPEC+ group of nations announced its largest supply cut since 2020 ahead of European Union embargoes on Russian energy, heightening concerns over increasing inflation.
The action has created a diplomatic schism between the Saudi-backed group and Western nations, which are concerned that increased energy costs will harm the ailing global economy and impede efforts to deprive Moscow of oil revenue in the aftermath of Russia’s invasion of Ukraine.
Global crude prices rose this week, returning to three-week highs, after the Organization of Petroleum Exporting Countries and their allies, including Russia, agreed on Wednesday to reduce output by 2 million barrels per day just before the peak winter season.
This is likely to drive up spot prices, particularly for Middle East oil, which meets roughly two-thirds of Asia’s demand, according to industry participants, adding to inflation concerns as governments from Japan to India battle rising living costs, while Europe is expected to burn more oil to replace Russian gas this winter.
‘We are concerned about a rise in worldwide oil prices, which have showed symptoms of easing since the second quarter,’ a representative for South Korea’s largest refiner, SK Energy, told Reuters.
According to another South Korean refining source, the supply cut may cause prices to return to levels observed in the second quarter.
South Korea, Asia’s fourth-largest economy and manufacturing powerhouse, has seen costs surge as commodity prices have risen.
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