Petrol, diesel prices hike looms, as Brent crude hits $92 per barrel, highest since November 2022

Oredola Adeola

Brent crude price on Wednesday, September 13, 2023, hit $92 per barrel as global crude oil traded at levels not seen since November, late 2022, therefore making sense out of the extension of voluntary cuts by Saudi Arabia and Russia. The rise in oil prices is expected to lead to an increase in petrol and diesel prices.

Last week, Saudi Arabia and Russia announced the plan to extend voluntary oil cuts of 1 million barrels per day(mbpd) and 300,000 bpd respectively, to the end of the year, a decision which has therefore pushed the price of Brent above $90 per barrel (as of 6 pm on Tuesday, September 5, 2023) and the prices have maintained upward swing since then.

While the impact of the voluntary production cuts by the two OPEC+ big players influenced the global prices of crude oil, the OPEC’s Monthly Oil Market Report (MOMR) released on Tuesday, September 12, 2023, showed that Nigeria and Iran lifted the cartel’s production by 113,000 bpd.

The two major oil producers are making these significant cuts, reinforcing the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.

Russia’s Deputy Prime Minister Alexander Novak, last week, said, “The additional voluntary reduction of oil supplies for export is aimed at strengthening the precautionary measures taken by OPEC countries in order to maintain the stability and balance of oil markets.

“The voluntary cuts would be reviewed monthly, “to consider the possibility of deepening the reduction or increasing production, depending on the situation on the world market,” Novak said.

Of course, Saudi particularly wanted higher prices, not minding the implication of this on its already battered relationship with the U.S.

Eurasia Group analyst Raad Alkadiri told the Financial Times in a recent statement, ““The Saudis don’t have a lot of friends in Washington right now. There’s absolutely the risk that they start to become ‘Exhibit A’ if Washington wants to blame someone for high pump prices or a slowing economy again.”

Without any iota of doubt, the consistent increase in global prices of all grades of crude oil will further shoot up the prices of petroleum products including Premium Motor Spirit(petrol) as well as Diesel.

Goldman Sachs Commodities Research said Saudi Arabia and Russia’s extension of voluntary supply cuts posed bullish risks to their crude price forecasts, raising a possibility that Brent could jump as high as $107 a barrel next year.

According to Oilprice.com, every economy is quite literally fueled by diesel, and with the fuel’s prices up so much, everything else is getting more expensive, too. Eventually, this would lead to lower consumption.

It reported that the global energy crisis that the higher prices triggered by Saudi’s extended voluntary cut will cause is a very major blow on the United States President Joe Biden, who will be seeking re-election in 2024.

Irina Slav of Oilprice.com said “The Biden administration is in a bind, and it won’t be far-fetched to suggest that it is a bind very much of its own making. These are the toughest ones to get out of.

This increase in global crude oil prices to above $90 per barrel is expected to lead to a hike in petroleum product prices in Nigeria, which is already struggling to recover from the post-subsidy removal regime that caused petrol prices to rise above rates that citizens can afford, with attendant economic implications.