Are the US and Europe facing greater inflationary pressures?, International oil prices usher in a new round of strong rise

Recently, the prices of major international crude oil futures have risen to the highest level in nearly a year, attracting attention. Previously, Saudi Arabia and Russia announced earlier this month that their measures to reduce crude oil production will continue until the end of this year. As oil prices continue to rise, the United States and Europe may face greater inflationary pressure.

New high within the year

Last week, major international crude oil futures prices climbed to the highest level in nearly a year. As of the close on September 15th, the price of light crude oil futures for October delivery on the New York Mercantile Exchange rose 61 cents, closing at $90.77 per barrel, an increase of 0.68%; The London Brent crude oil futures for November delivery rose 23 cents to close at $93.93 per barrel, a 0.25% increase.

The strong rise in international oil prices began at the beginning of this month. Saudi Arabia and Russia announced on the 5th of this month that measures to reduce crude oil production will continue until the end of this year.

According to Xinhua News Agency, the Saudi news agency quoted an unnamed official from the Saudi Ministry of Energy as saying that Saudi Arabia's continued production reduction is to "strengthen the preventive measures taken by OPEC+countries to maintain stability and balance in the oil market.".

After the extension of production reduction measures, Saudi Arabia's daily oil production from October to December is expected to be around 9 million barrels. Meanwhile, Saudi Arabia will conduct a monthly evaluation of this production reduction measure to determine whether to make adjustments.

On the 5th of this month, Russian Deputy Prime Minister Alexander Novak also issued a statement announcing that Russia will continue to reduce daily crude oil production by 300000 barrels until the end of this year.

International oil prices have risen accordingly. Brent crude oil futures prices have risen to over $90 per barrel. In contrast, the Brent crude oil futures price in June was only around $72 per barrel. There are reports that international oil prices have risen by nearly 30% since June.

Brent crude oil futures prices have exceeded $90 per barrel this month, marking the first time since November last year. Since November last year, OPEC+countries composed of OPEC member countries and non OPEC oil producing countries have taken measures such as reducing production to stabilize crude oil prices.

Since the beginning of this month, the price of West Texas Intermediate crude oil futures on the New York Mercantile Exchange has also risen to nearly $90 per barrel.

Bob McNally, founder and president of Lapidan Energy Consulting in the United States, said that Saudi Arabia and Russia both announced continued production cuts, demonstrating their "unity and determination" in actively controlling oil price risks. He predicts that the relevant measures will create a "huge gap" in the international oil market supply, driving crude oil prices "far above $90 per barrel".

There are also reports that data tracked by the US Energy Intelligence Agency shows that the increase in demand for flights in countries such as the United States and Europe has also stimulated the rise in aviation fuel prices.

In addition, Libya has recently experienced severe flooding, which has raised concerns about supply disruptions for this OPEC member, thereby driving up oil prices.

Inflationary pressure

Based on current trends, some analysts predict that international oil prices will continue to face upward pressure before the end of this year, and may even reach a level of $100 per barrel this month, which will be the first time this year.

At the same time, the sustained rise in international oil prices may have multiple impacts, attracting attention.

In terms of economy, the decline in oil prices in the first half of this year played a certain role in curbing inflation in the United States and Europe. But now, with a new round of strong oil price increases, the inflationary pressure faced by the United States and Europe may intensify in the second half of this year and even in 2024. Some comments suggest that the recent surge in energy prices may undermine some of the progress made by central banks in fighting inflation.

According to data released by the US Department of Labor on September 13th, the US Consumer Price Index increased by 0.6% month on month in August, higher than the 0.2% increase in the previous month; The year-on-year increase was 3.7%, an increase of 0.5 percentage points compared to the previous month. Specifically, energy prices increased by 5.6% month on month, with gasoline prices rising by 10.6% month on month.

George Leon, Senior Vice President of Rustad Energy in Norway, said it is difficult to predict the impact of further production cuts on "Western inflation and economic policies.". The increase in crude oil prices will only increase the likelihood of the government implementing more fiscal tightening policies, especially in the United States.

According to reports, given the direct correlation between high energy prices and declining presidential approval ratings, senior White House officials are closely monitoring the soaring fuel costs and regularly discussing various options to lower oil prices, involving both domestic and international levels.

It is reported that the US has some tools that can help reduce oil prices, such as releasing strategic oil reserves or convincing international oil suppliers to produce more oil, but the latter currently seems less feasible. Other options include relaxing restrictions on Iranian exports and lifting sanctions on Venezuela, but these measures may face opposition from the Republican Party domestically.

In terms of diplomacy, some analysts believe that given the previous multiple demands from the United States to increase production in Saudi Arabia to stabilize oil prices, Saudi Arabia's continuation of production reduction measures will bring new discord to the United States and Saudi Arabia.

In response to Saudi Arabia and Russia's decision to continue reducing crude oil production earlier this month, US National Security Assistant Jack Sullivan stated that the US hopes for a "stable and effective supply" to the international crude oil market.