- Oil prices rose as much as 8% at the open after OPEC+ announced a production cut of 1.16 million barrels per day.
- “OPEC+’s plan for further production cuts could push oil prices back toward $100,” CMC Markets analyst Tina Deng told CNBC.
Oil storage tanks stand at the RN-Tuapsinsky refinery operated by Rosneft Oil Company at night in Tuapse, Russia.
Andrei Rudakov | Bloomberg | Good pictures
Oil prices rose as much as 8% at the open after OPEC+ announced a production cut of 1.16 million barrels per day.
Brent crude futures rose 5.07% to $83.95 a barrel on the news, and US West Texas Intermediate crude futures rose 5.17% to $79.59.
Voluntary cuts will begin in May through the end of 2023. Saudi Arabia announcedHe said it was a “precautionary measure” aimed at stabilizing the oil market.
The move comes in the wake of Russia’s decision Cut oil production by 500,000 barrels per day According to the country’s Deputy Prime Minister Alexander Novak, until the end of 2023.
Other member states have also pledged their respective cuts OPEC kingpin Saudi Arabia is cutting 500,000 barrels a day And The United Arab Emirates cuts 144,000 barrels per dayOther cuts are from Kuwait, Oman, Iraq, Algeria and Kazakhstan.
“OPEC+’s plan for further production cuts, seen as China’s reopening and Russia’s production cuts in response to Western sanctions, could push oil prices back toward $100,” CMC Markets analyst Tina Teng told CNBC.
OPEC’s logo is pictured at OPEC headquarters on October 4, 2022. In October last year, the oil cartel announced its decision to cut production by two million barrels per day.
Joe Glamor | Afp | Good pictures
However, the cut could reverse the decline in inflation, which would “complicate central banks’ rate decisions,” Deng noted.
In October last year, the oil cartel announced its decision It cut production by two million barrels per day. The White House said at the time that President Joe Biden was disappointed by OPEC+’s short-sighted decision to cut production quotas while the world was still grappling with the war in Ukraine.
“However, unlike [the cut in October]”The momentum for global oil demand picked up, not slowed by a strong China recovery,” Goldman Sachs said in a note.
That could raise Goldman’s Brent forecasts by $5 to $95 a barrel for December 2023, the investment bank said in a note after the surprise overnight result.
Analysts led by Goldman Sachs’ Dan Struyven said the surprise cut was “consistent” with OPEC+’s theory of early action.
In March, oil prices fell to their lowest level since December 2021 as traders feared that the banking crisis could hamper global economic growth.
The oil cartel and its allies are looking to avoid a repeat of the 2008 crash, an analyst said.
“They’re looking at the second half of this year and deciding they don’t want to relive 2008,” said Bob McNally, president of Rapidan Energy Group, which saw oil prices fall from $140 to $35 in six months.
McNally added that while it wasn’t his base case, oil prices could “make a dash for $100 … if Chinese demand returns to 16 million barrels per day in the second half of this year. [and] If Russian supply starts to stop because of sanctions and so on.”