Brent Crude topped $90 a barrel for the first time in 2023 as the price of oil continued its recent rally. Earlier this year Saudi Arabia capped its oil production to try and drive the price up from recent lows. This week it announced this temporary production cap would be extended to the end of the year, meaning it will be producing 1 million barrels less each day. Russia also announced that its production cap would be extended to the end of the year.
The increase in the oil price has helped UK energy stocks outperform the broad index in recent weeks. However, higher oil prices will be less welcome by the Bank of England as it aims to get inflation under control. Declining energy prices have played a significant part in reducing headline inflation. But with petrol and diesel prices already rising the recent disinflationary effect from energy costs could be put into reverse.
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