Oil Prices Soar After OPEC+ Announces Production Cut

Following the surprise cuts in production announced by OPEC+ nations, the prices of oil soared and surpassed USD 85 per barrel. The price of Brent crude oil surged over $5 a barrel or 7%, to over $85 as trading began.

As per the Russian News Agency, the price of Brent petroleum oil futures contracts has augmented for the first time since March 7.

According to Saudi Arabia, the voluntary cuts will commence in May and last until the end of 2023. While putting emphasis, an official from the Saudi Press Agency carried out a statement stating that this is a precautionary measure meant to support the stability of the oil market.

This voluntary cut is in addition to the output reduction that was decided during the 33rd OPEC and non-OPEC Ministerial Meeting, which took place on October 5, 2022.

The Washington Post reported that although OPEC Plus had stated that they had no plans to change their policies, the announcement still caught everyone off guard.

Russia’s deputy Prime Minister Alexander Novak believes that the move was prompted by the decision to reduce oil output by 500,000 barrels per day through the end of 2023.

Other state members have also promised their reductions, with the UAE cutting 144,000 barrels per day and Kuwait, Oman, Iraq, Algeria, and Kazakhstan cutting 500,000 barrels per day, respectively.

Before this announcement, oil producers from the Organization of the Petroleum Exporting Countries (OPEC) Plus declared additional output reductions of about 1.16 million barrels per day.

The oil cartel announced its plan to reduce output by two million barrels per day in October, last year. President Joe Biden was “disappointed by the shortsighted decision by OPEC+” to reduce production quotas at the time, according to the White House, which also noted that the world was still dealing with the conflict in Ukraine.

Post the unexpected move overnight, Goldman said in a note that Brent forecasts for December 2023 could be increased by $5 per barrel to $95 per barrel.

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