The decision of Saudi Arabia and Russia to extend their current output cuts has helped Brent crude oil prices reach $91 per barrel for the first time this year.

While a potential boon for energy companies listed in the UK and elsewhere, the development threatens to be an inflationary pressure which investors need to follow closely.

Brent, the international benchmark for oil, is up around 25% since the end of June to nine-month highs.

The latest catalyst was the news on 5 September that Saudi Arabia and Russia had agreed to continue with export and production quotas through to the end of the year.

Saudi Arabia’s one million barrel per day cut has been in place since July and has been extended twice already. Russia has trimmed 300,000 barrels of oil per day from its exports.

The market had expected an extension but not of this length and the announcement helped push oil sharply higher as it implied both the Saudis and Russia are committed to maintaining high prices.

The other driver for oil has been a substantial draw on US stockpiles of crude in recent months – a trend which has accelerated in the last few weeks.

Over the past month shares in the London market’s two big oil firms – BP (BP.) and Shell (SHELL) – are up 6.6% and 3.5% apiece. BP’s greater advance reflects its bias towards oil when compared with Shell’s key focus on natural gas.

The surge in oil has implications beyond the energy space. Rupert Thompson, managing director at wealth manager Kingswood, observes: ‘Oil is poised to complicate the recent story of a marked fall in headline inflation. Whereas energy prices have recently been a major factor driving headline inflation down, as last year’s sharp rises have dropped out, they now look set to push it up somewhat.’

Typically, central banks focus on core inflation – which strips out the impact of volatile inputs like food and energy prices – however, the wider context is not something they can ignore entirely.

For the Federal Reserve, higher oil prices carry less weight because the US is a net exporter of energy. However, central bankers in the UK and European Union – looking ahead to renewed pressures this winter – cannot afford to be as sanguine. This is the somewhat unhelpful backdrop to forthcoming interest rate meetings of the Fed and Bank of England on 20 and 21 September respectively.

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