RAC: Petrol prices to be "kept in check" if oil prices overshoot $50 per barrels

Jessica Morris
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A person uses a petrol pump in a BP fili
Petrol prices fell below £1 in December (Source: Getty)

The RAC assured motorists it expects fuel prices to remain in check, despite a recent uptick in the oil price due to production outages across the world.

Supermarkets slashed petrol prices to below £1 per litre in the run-up to Christmas, citing savings from oil prices which had fallen from over $110 per barrel in the middle of 2014 to around $37.

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"The latest news is that US crude supplies have actually increased again rather than shrunk so there is now talk that the market has risen too far, too quickly. This could well help to take some of the heat out of the oil price and as a result we expect fuel prices to be kept in check for the UK's 30m car drivers," Simon Williams, RAC spokesman, said.

Brent recovered from a multi-year low of below $28 per barrel in January to around $50, with even uber bear Goldman Sachs upgrading its outlook for the black stuff. It's been helped by a combination of Nigerian, Venezuelan and other outages.

It lost some of the gains earlier this week after an unexpected increase in US crude oil stocks underscored oversupply fears. The EIA said crude oil inventories rose by 1.3m barrels to 541.3m barrels last week.

"The other factor that should not be forgotten is that if oil were to stay around the $50 mark for too long the US will resume its oil production from fracking. The Organisation of the Petroleum Exporting Countries does not want to see this happening, so there is likely to be a renewed focus on increasing production to deflate the oil price," Williams added.

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Opec shocked markets last year by refusing to cut production in the face of tumbling oil prices, a Saudi-led strategy designed to price higher-cost US shale gas producers out of the market. Opec and other oil producers also failed to agree a production freeze deal in April.

The oil cartel doesn't currently have a production target, having scrapped the previous limit of 30m barrels per day at its meeting in December.

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