Oil price jumps sharply, stoking global inflation fears

Kathmandu: Oil prices have jumped sharply after Saudi Arabia and other OPEC countries announced a surprise cut in production.

As markets re-opened for business in Oceania and Asia on early Monday, oil prices rose by almost 6 percent. Sharp Rise in both the benchmark oils followed the surprise announcement by Saudi Arabia, Iraq and other Gulf states to reduce oil production.

Brent Crude oil reported a jump of over 6%, rising $5.16 (roughly €4.78) to $85.05 per barrel. The US West Texas Crude index climbed $4.88, to $80.55.

The Organization of Petroleum Exporting Countries (OPEC) called the production cut a “precautionary” move aimed at stabilizing the market. But rising oil prices potentially affect the oil-importing countries, and particularly the less wealthy ones will feel the severe impact.

The latest rise in the oil price will likely stoke global inflation fear as well and put pressure on central banks to further hike interest rates. The latest reductions could also lift oil prices by $10 per barrel, the head of investment firm Pickering Energy Partners said on Sunday.

Market ‘sentiment is likely to take a knock,’ Matt Simson at City Index said, ‘as higher levels of expected inflation assume higher (for longer) interest rates.’ ‘And stocks likely won’t appreciate this development, so we could be in for a rocky start to the week,’ he added.