Oil prices rise to highest level in almost a year amid global inflation fears

Oil prices have risen to the highest level in nearly a year as demand for the commodity prompts renewed worries over global inflation.

Brent crude oil surpassed $97 (£80) per barrel on Thursday, the highest level since early November.

It has been edging towards the $100 (£82) mark which was last hit more than a year ago.

The recent spike in oil prices comes after two of the world’s biggest producers, Russia and Saudi Arabia, announced production cuts earlier this year.

The move helped boost the price of the commodity which has been climbing steadily since mid-August.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Concerns about tight supplies are fuelling the rise in oil prices, reigniting worries about inflation and the need for interest rates to stay higher for longer.

“Brent crude has swept past 97 US dollars a barrel as the effect of Saudi Arabia and Russia’s extended production cuts takes hold and data shows a faster than expected drawdown of crude stocks in the US.

“Despite slowing economies in Europe and fragility in China, global demand for oil for now continues to ramp up, to meet the seemingly insatiable needs for transportation, power generation and other petrochemical activities.

“The psychologically important milestone of $100 a barrel is in sight, which is prompting concerns about higher energy costs being passed on by companies in the form of higher prices.”

Last week, the Bank of England voted to keep interest rates unchanged for the first time in almost two years.

But policymakers kept the door open for further rises in the future, promising to “take the decisions necessary” to return inflation to normal levels.

It comes as inflation in the UK slowed to 6.7% in August, down slightly from 6.8% in July, official figures showed.

Meanwhile, the US Federal Reserve also decided to hold interest rates, while the European Central Bank pushed through another rate hike despite the eurozone economy teetering on the edge of a recession since last year, growing only 0.1% in each of the first two quarters this year.

“Another leg up in oil prices has added to the market worries about sticky inflation, thereby stoking fears that interest rates will stay higher for longer,” said Russ Mould, investment director at AJ Bell.

“The market is worried that supplies of oil are going to be tight and if prices keep going, it is going to cause a real headache for businesses and consumers.”