What is OPEC and why could its latest announcement lead to more expensive petrol

What is OPEC and why could its latest announcement lead to more expensive petrol
OPEC – the Organization of the Petroleum Exporting Countries – has announced a cut in oil production that could cause UK petrol prices to rise this December.

While petrol and diesel prices fell for the first time in four months in November, according to latest data from RAC Fuel Watch, it is thought last month’s action by the OPEC could render these reductions short-lived and the RAC is now warning drivers to expect increases at the pumps before Christmas.

The recent falls came with a mid-month supermarket cut in prices that saw around 2p taken off the price of both petrol and diesel nationally.

By November 30, the average price of unleaded was down 2.89p to 113.96p per litre, while diesel was down 2.4p to 116.37p per litre.

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But motorists shouldn’t get used to the new lower prices, after OPEC announced a cut in oil production on the last day of November.

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This led to a rise in the price of a physical barrel of Brent crude rising 7% at $49.09 on November 30. It rose again a further $3.40 on the first day of December to $52.49.

Unfortunately, it will almost certainly lead to further increases in the coming days and weeks on the forecourts of the UK.

Currently, the average price of filling up a 55-litre family petrol car is at £62.68, down from £64.27 at the start of November – or £64 for diesel, down from £65.32.

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RAC fuel spokesman Simon Williams said: “While November was a good month for fuel prices with the first reduction for four months, it looks as though motorists are about to have an unwelcome early Christmas present in the form of higher prices at the pump.

“This is a big change from the last two Decembers when drivers benefited from falling fuel prices.

“Given retailers were relatively slow to pass on wholesale price savings to motorists last month, despite the RAC’s calls for a cut, we will be monitoring closely to see if forecourt prices now rocket as a result of the recent leap in the price of oil.

“The medium-term outlook for prices is, however, much harder to predict. OPEC has not cut supply for eight years and since mid-2014 has been actively operating an oversupply strategy to keep the barrel price low, to make it unviable for the United States to produce oil from fracking.

“This week’s production cut appears to be a move away from that and unusually is supported by Russia, which is not a member of OPEC.

“What happens to the oil price in the next few weeks as the markets react will be crucial and could set the tone for what happens to prices early into 2017.

“If the US now responds by increasing its output, prices may not rise as sharply as some are predicting. It is also important to remember that the OPEC cut is currently only in force for six months.”