Petrol prices: Howard Cox calls for cuts to fuel duty
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The Organisation of Petroleum Exporting Countries (OPEC) today decided to maintain plans to hike oil production by 400 thousand barrels a day. Composed of oil producing countries such as Iran and Iraq and lead by Saudi Arabia, the group manages production levels across its members with today’s decision continuing a policy decided in December. Oil prices rose to nearly $80 (£59.27) a barrel today despite the move, which aims to increase the amount of oil in circulation. Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown explained: “Expectation of higher global demand in 2022 is buoying the price and also there are some questions about whether cartel members actually will have the capacity to reach the quotas they have been allocated due to production issues.”
According to the International Energy Agency OPEC members missed their production targets by 650,000 barrels per day in November.
In particular Nigeria and Angola have been falling short of quota with Libya also recently seeing a marked fall in production due to political issues.
Predictions of higher demand for oil in 2022 come as market confidence improves over reports Omicron is more mild than previous strains with lower fears over potential restrictions and lockdowns.
Reuters report a technical document seen from OPEC played down the impact of Omicron, describing it as “mild and short-lived.”
Jamie Maddock, equity research analyst at Quilter Cheviot, commented: “This confidence in the sustained demand recovery against a still fundamentally under-supplied oil market is likely to provide good price support.
“Despite the strong performance of the oil price over the short and medium term, this news won’t dampen the recovery in prices anytime soon.
“As a result, the oil majors will continue to benefit as they look to transition their business models onto a more sustainable footing.”
Oil prices previously crashed when the variant first emerged with fears travel and aviation in particular would be affected.
After falling to around $65 (£48.11) a barrel in early December prices have since ramped up again.
Paul Holland, Managing Director for UK Fuel at FLEETCOR agreed there was more optimism over Covid, leaving the market up.
However long term uncertainty is set to remain in 2022 with any other developments around Covid likely to have a big impact on fuel prices.
Speaking to Express.co.uk Mr Holland explained oil prices would remain driven by future expectations more than any increase in supply now.
For consumers who have seen petrol prices reach record highs in 2021 this would mean relief could still be far off.
“Fuel prices are a few pence higher than we would expect in a flat market” Mr Holland said, explaining that retailers may be reluctant to lower prices over concerns they may end up having to increase them again- creating volatility.
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While OPEC has historically had a major influence over oil prices, Covid has become a major driver adding to the unpredictability of fuel prices.
In November President Biden announced the release of 50 million barrels of oil from the US’s strategic reserves in a bid to increase supply and bring down prices.
Several other countries including the UK and China also followed suit however the impact of this was largely lost among the market reaction to the Omicron variant.
Since the start of the pandemic OPEC has cut back production massively in the face of falling demand due to lockdowns and travel bans.
The current increases in production look to begin reversing this however some, notably the US, have called for faster returns to normal production.
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