After the OPEC+ group of nations agreed to its most significant supply reduction since 2020 in advance of European Union energy embargoes against Russia, the global oil supply is expected to tighten, heightening fears of surging inflation.
The action has exacerbated the diplomatic chasm between the Saudi-backed bloc and Western nations, which are concerned that increased energy prices would harm the weak global economy and impede efforts to deny Russia oil money in response to its invasion of Ukraine.
Crude oil futures increased this week, rebounding to three-week highs after the Organization of the Petroleum Exporting Countries and their allies, including Russia, agreed on Wednesday to reduce output by 2 million barrels per day just before the winter season’s peak demand.
This is likely to increase spot prices, especially for Middle Eastern oil, which satisfies about two-thirds of Asia’s demand, according to industry participants, adding to inflation concerns as governments from Japan to India battle rising living expenses, and Europe is expected to burn more oil this winter to replace Russian gas.
A representative for SK Energy, South Korea’s largest refiner, told Reuters, “We are concerned about a rise in world oil prices, which have shown signs of stabilization since the second quarter.”
According to a second South Korean refining source, the supply decrease might return prices to second-quarter levels.
South Korea, the fourth-largest economy in Asia and a manufacturing powerhouse, has seen skyrocketing expenses due to soaring commodity prices.