Motorists are braced for higher pump prices after the cost of oil climbed above $90 a barrel for the first time this year as Russia and Saudi Arabia extended cuts to supplies.
Oil jumped to its highest price since last November, after the two oil-rich nations said they would prolong a plan to withhold supplies from the global market until December.
The price hike has reignited fears that higher energy costs could increase fuel prices at the pump for motorists and push up rates of inflation across major economies.
Russia and Saudi Arabia said they would continue to cut a total of 1.3m barrels a day from their output, even as global demand continues to rise to near-record levels. The cuts will keep output at about 9m barrels a day.
Oil market traders had expected Saudi Arabia and Russia to keep their production cuts in place through September and October but the plans to withhold oil from the market until the end of the year have raised fears for the recovery of major economies and for consumers.
Rod Dennis, a spokesperson for the RAC motoring group, said: “Drivers had already seen a sharp increase in pump prices through the course of August as a result of the oil price rising.
“An even higher oil price is likely to force wholesale fuel prices up further, and – if these are sustained – that’s likely to spell further price rises on forecourts up and down the UK in the coming weeks.”
The price of petrol surged by nearly 7p last month to an average of 152.25p a litre, while diesel shot up by 8p to 154.37p a litre, according to analysis by the RAC, which were some of the sharpest monthly hikes in the last 23 years.
Oil prices have resumed their upward trajectory despite weak economic data across Europe and a sharp slowdown in China, which are often used as indicators of future energy demand.
Oil markets began to climb earlier this summer after the Opec oil cartel, led by Saudi Arabia, agreed with Russia and its allies to withhold oil supplies. The so-called Opec+ group are expected to meet in November to agree their production policy for the early months of 2024.
A decision last year to cut production angered the US president, Joe Biden, as it undermined his attempts to cut fuel costs.
Riyadh said on Tuesday it would review its reduction of 1m barrels a day each month to consider whether it should deepen the cuts or increase production, according to the kingdom’s state news agency SPA.
Separately, Russia’s deputy prime minister, Alexander Novak, said the Kremlin would prolong its cuts of 300,000 barrels of oil a day “to maintain stability and balance” on oil markets.