Oil prices remain key for world monetary policies

What happens to the price of oil in the coming months will be critical to the global inflation outlook, and, of course, to the monetary policy of the world’s major central banks.

Despite agreed production cuts from the OPEC and other producers, oil prices remain lower than at the start of the year, with markets still concerned over a supply glut.

Saudi Arabia, in particular, has an incentive to push prices higher. Riyadh can’t afford an oil price of $50 a barrel or below. According to market estimates, oil needs to be trading at $55, at least, for Saudi Arabia to hit its budget-deficit target of $53bn in 2017.